Detailed Answer
Under Indiana law, a trustee owes beneficiaries a strict fiduciary duty to manage trust assets in their best interests. When a trustee misuses trust funds, beneficiaries can pursue several legal remedies.
1. Review the Trustee’s Duties
Indiana Code § 30-4-3-3 requires trustees to preserve trust property, keep accurate records, and provide beneficiaries with accountings. Misuse of funds—such as unauthorized withdrawals, self-dealing, or excessive fees—constitutes a breach of these duties.
2. Demand an Accounting
Beneficiaries may formally request an accounting of all transactions. If the trustee fails to comply, Indiana Code § 30-4-3-17 allows a beneficiary to petition the court to compel an accounting and production of records.
3. Petition the Court for Removal
If the trustee’s misconduct is serious, beneficiaries can file a petition in probate or circuit court under Indiana Code § 30-4-3-18 to remove the trustee for cause. Causes include breach of trust, conflict of interest, or failure to act impartially.
4. Seek Financial Remedies
Under Indiana Code § 30-4-3-9, beneficiaries can ask the court to surcharge (monetarily penalize) the trustee, order restitution of misapplied funds, and award costs and attorney fees. The court may also appoint a replacement trustee.
5. Observe the Statute of Limitations
Claims for breach of fiduciary duty in Indiana generally must be filed within two years per Indiana Code § 34-11-2-1. Acting promptly preserves your rights.
6. Consider Alternative Dispute Resolution
Before or during litigation, beneficiaries may explore mediation or arbitration to resolve disputes more quickly and less expensively.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney to discuss your specific situation.
Helpful Hints
- Gather all trust documents and prior accountings before taking action.
- Keep detailed records of any suspected misuse or communications with the trustee.
- Consult a licensed probate attorney to understand your options.
- Act quickly to avoid missing the statute of limitations.
- Consider whether informal negotiation could resolve the issue without court.
- Be prepared for potential court costs and time commitments if litigation is necessary.