Disclaimer: This article is for educational purposes only and does not constitute legal advice.
Detailed Answer
Under Tennessee law, a trustee holds a fiduciary duty to administer a trust solely in the best interests of the beneficiaries. If a trustee misuses or misappropriates trust funds, beneficiaries have clear legal pathways to challenge that misconduct.
1. Review the Trust Document
First, beneficiaries should obtain and review the trust instrument. The document often spells out the trustee’s powers, duties, and permissible actions. Understanding these provisions helps identify specific breaches.
2. Demand an Accounting
Tennessee Code Annotated § 35-15-107 requires a trustee to keep clear records and furnish beneficiaries with accountings on request (T.C.A. § 35-15-107). Send a formal written request for a full accounting of all trust transactions, receipts, and disbursements.
3. Identify the Breach
Once you receive an accounting, look for red flags such as unauthorized loans to the trustee, personal expenses paid from trust assets, or unexplained transfers. These actions violate the duty of loyalty (T.C.A. § 35-15-108).
4. Attempt Resolution Outside Court
Beneficiaries can send a demand letter outlining the breach and requesting restitution. Mediation or settlement discussions may resolve minor disputes without court intervention.
5. Petition the Court
If informal efforts fail, file a petition in the county probate or chancery court where the trust is administered. Under T.C.A. § 35-15-713, the court may remove a trustee for cause, including self-dealing or a breach of fiduciary duty (T.C.A. § 35-15-713).
6. Seek Surcharge and Restitution
The court can surcharge (financially penalize) the trustee and order them to repay misused funds. Under T.C.A. § 35-15-715, the judge may also modify administrative provisions to protect beneficiaries (T.C.A. § 35-15-715).
7. Monitor Ongoing Administration
After a court order, beneficiaries should request periodic accountings and remain vigilant. If new issues arise, repeat the petition process.
Helpful Hints
- Document all communications and keep copies of trust accountings and statements.
- Consult a probate or trust attorney early to assess the strength of your claims.
- Track deadlines for filing petitions; Tennessee’s statutes of limitations for breach of fiduciary duty generally run up to three years from discovery.
- Request a certified copy of the trust instrument and amendments from the trustee or court.
- Consider mediation to reduce legal costs and reach a faster resolution.