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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Legal
Satisfied Customers: 118112
Experience:  JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law
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I am a trustee on a Health & Education trust for 3 children.

Customer Question

I am a trustee on a Health & Education trust for 3 children. This was established in 2000 when the children were babies. The trust agreement does not require an accounting to the owner unless asked for. During the past twelve years, I have had no contact from the owner regarding the trust except for a K-1 being sent to me at tax time in order for me to file the taxes. I have been paying educational and health expenses for the children. I am now being sued by the owner for lack of investment performance. While I invested the funds in the stock market throughout the years, I became leary in 2008 due to the crash and pending educational expenses so I exited the market with a minimal loss. The trust was funded in 2000 with $235,000 and in January 2012 I was left with $204,000. I am being sued for $250,000 which the owner thinks I should have made for the trust. Please advise
Submitted: 4 years ago.
Category: Legal
Expert:  Law Educator, Esq. replied 4 years ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking.

The trustee of any trust, absent specific directives in the trust, is liable for only reasonable and prudent management and to make reasonable business decisions on behalf of the trust. As long as the trustee makes such reasonable effort they are not breaching their fiduciary duty to the trust. The trustee does not have to make the best of all business decisions, just decisions that a reasonable person with the same skill and experience of the trustee would find reasonable under the same circumstances.

Thus, if you pulled out of the market because of the economic downturn in 2008+, this would arguably be reasonably prudent and while the grantor may be complaining about this, it is likely going to end up spending money out of his trust for your legal defense and ultimately show your actions were reasonable and prudent. Unfortunately, you will need an attorney to represent you in this matter as trustee and when you win the suit the trust will be liable for paying your legal fees unless the court orders the plaintiff to pay those fees, as long as you can show you were in reasonable performance of your job as trustee.

The trustee is only liable if the owner or heirs can prove they acted negligently or in a reckless and wanton manner, and there is no economist in the country who would tell any court credibly that removing money from the market at the beginning of the crash was a negligent, reckless or wanton move.

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