The beneficiaries of a trust receive distributions based on the instructions of the grantor. Trustees have a duty to follow the instructions in trust documents and to make appropriate distributions to beneficiaries.
They should act in the best interests of beneficiaries, which typically involves maintaining trust resources to optimize what beneficiaries receive. In cases where they undervalue assets, beneficiaries may need to remove a trustee whose conduct diminishes the value of a trust.
How asset valuation can affect a trust
If the resources used to fund a trust are largely physical assets or real property, the liquidation of those resources may sometimes be necessary to make distributions to beneficiaries. Selling assets can generate revenue that trustees can then distribute. Particularly when selling assets worth hundreds or thousands of dollars, validating the fair market value of those resources before committing to a price is of the utmost importance.
Selling a vehicle for half of its current Blue Book value diminishes the value of the trust and deprives beneficiaries of that value. When a trustee frequently undervalues resources, especially if they sell those resources to themselves, a business they run or a person with whom they have a close relationship, their conduct could constitute a breach of their duty to the trust and its beneficiaries.
In some cases, trustee removal can prevent the sale of undervalued resources. Other times, litigation can remove a trustee who has breached their duty, which can help preserve the remainder of the trust resources for beneficiaries.
Reviewing trust disclosures and annual accounting documents with a skilled legal team, as well as any communications about major upcoming sales, can help concerned beneficiaries take prompt action. The choice to remove a trustee is sometimes the best option available when their conduct diminishes the value of a trust and, therefore, the distributions received by beneficiaries.