HOW TO PREVENT MISMANAGEMENT & AVOID DISPUTES To help prevent trustee mismanagement and reduce the risk of disputes, it’s essential to build strong safeguards into the trust from the start. When a client is preparing to serve as a trustee and seeks your guidance, recommend that the trust document include clear financial guidelines, i.e., how investments should be managed, approval processes for major transactions, and distribution standards. These details reduce ambiguity and protect against fiduciary errors. Recommend oversight mechanisms, such as co-trustees or a trust protector with authority to remove or replace a trustee, to strengthen accountability. Establish reporting requirements and response timelines to promote transparency and allow early detection of issues. Finally, confirm that trustee compensation is well-defined, either capped or tied to the trust’s size and complexity, to prevent excessive fees and preserve trust assets. HOW TO ADDRESS TRUSTEE MISMANAGEMENT If a client suspects trustee mismanagement, advise them that beneficiaries have several remedies. The first step is often requesting a formal accounting to review trust transactions and financial activity. If the trustee fails to provide this, court intervention may be required. In serious cases, such as clear breaches of duty or ongoing mismanagement, beneficiaries can petition for trustee removal. Courts may also compel compliance, prevent further violations, or recover misused assets through a constructive trust or surcharge action against the trustee. In appropriate circumstances, courts may also appoint a neutral third-party fiduciary, known as a special administrator, to serve in the role of trustee for some or all purposes of the trust’s administration. Throughout this process, stress the importance of engaging experienced legal counsel to protect interests and navigate complex trust litigation. CONCLUSION Trustees carry significant fiduciary responsibilities, and failure to meet those obligations can jeopardize the trust’s integrity and the beneficiaries’ financial security, as well as open the trustee to significant liability. By promoting transparency, prudent management, and proper oversight, CPAs can help safeguard trust assets and reduce the risk of disputes. Minja Herian, a shareholder at Koley Jessen, and Kaci Claborn, an associate with the firm, assist clients with complex litigation, including trust and estate disputes and issues involving trust administration. Their estate litigation team brings a practical, trial-ready approach to helping families and advisors resolve high-stakes conflicts. They can be contacted at minja.herian@koleyjessen.com and kaci.claborn@koleyjessen.com. It’s not balance—it’s belonging. At Frankel, you’re not just a name on a spreadsheet. You’re part of a team that celebrates birthdays, checks in after long days, and believes your career should fit your life. We’re growing—and we’re looking for people who want to grow with us. Tax, Audit, Accounting, Technology, & Business Consulting 402.496.9100 | jobs@frankel.cpa Learn more about open positions at frankel.cpa/careers 15 nescpa.org
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