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WILLS/TRUSTS 11: Allegations that a trustee violated his fiduciary duties.

This case involves allegations that a trustee violated his fiduciary duties.

Decedent died in April 2015, at the age of 86. In the mid-1990s, she had established an irrevocable life-insurance trust that was implemented by her attorney, but managed by an investment and financial-advice firm. The beneficiaries of the trust were nieces and nephews, and one of the nieces, served as family trustee for the trust. Her attorney served as the independent trustee.

In 2014, the trust funds became in danger of depletion, and in 2015, before her death, she decided to “cash out” the trust, obtaining a cash-out value of $36,031.34. Because of this cashing out, the $500,000 death benefit was no longer available to be paid to the beneficiaries.

The trustee niece believed that her aunt’s attorney had failed in his fiduciary duties as trustee and mishandled the life-insurance policy and the related trust funds. In 2016, she filed an objection to accounting, alleging that his failure to properly monitor the funds and provide progress reports and other information led to monetary loss for the beneficiaries of the trust.

Decedent’s attorney filed a motion for summary disposition, arguing, among other things, that decedent’s death having occurred shortly after cancellation of the insurance policy was an unfortunate turn of events, but that he was not the cause of any loss to the beneficiaries. He argued that even assuming that he should have obtained, and provided the beneficiaries with, further information about the trajectory of the funds in the years before 2014, it was pure speculation regarding whether this would have changed anything.

MCL 700.7803 states that a trustee shall act as would a prudent person in dealing with the property of another, including following the standards of the Michigan prudent investor rule. If the trustee has special skills or is named trustee on the basis of representation of special skills or expertise, the trustee is under a duty to use those skills. MCL 700.7810 states that a trustee shall take reasonable steps to take control of and protect the trust property.

The court found that trustee niece did not present sufficient evidence to create a question of fact. Even assuming that the attorney should have monitored the policy more closely over the years and provided more information to the beneficiaries, there is insufficient evidence regarding what would have been done differently if he had undertaken these actions. Trustee niece admitted in her deposition that it was speculation that she and the other beneficiaries would have had decedent stop it a long time ago if they had received updates from the attorney about the financial status of the funds.

The timing of the events in this case is truly unfortunate, but trustee niece simply did not provide sufficient evidentiary support regarding how the ultimate circumstances would have differed even if the attorney had been more proactive in obtaining and distributing information about the trust. Accordingly, the trial court properly granted summary disposition to the attorney.

In addition to drafting wills, trusts and other estate planning instruments, we can review your existing estate planning documents.  You may need to update your estate planning documents to reflect your current wishes and needs. We want you to be certain that your estate plan accomplishes what you want it to.

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