I often represent trustees who have gotten into a conflict with one or more beneficiaries of a trust after a loved one dies. I see this, for example, when the second parent of a couple dies, and the couple’s assets are to be distributed to their children. The couple names one of the children as the trustee, and her siblings may question how she is carrying out her duties as trustee.
If a trustee has in fact done something wrong, the Probate Court could order a “surcharge” against her–this basically means that she has to pay some money to the trust to make up for her mistake.
When I negotiate such issues, I sometimes find that the parties get confused about how much the trustee has to pay back. Let’s say that there are three siblings, one of whom is the trustee. Let’s also assume that the trustee’s mistake has cost the trust $ 120. There are two ways the trustee can pay this back. She can write a check on her personal checking account for $ 120 and deposit it into the trust’s checking account. As she has a one-third interest in the trust, she is essentially paying herself $ 40 and her two siblings $ 80. Or she can write two checks for $ 40 on her personal checking account and give them directly to her two siblings. Either way, the trustee is reimbursing her two siblings for their two-thirds interest in the trust’s loss of $ 120.