A trustee's responsibilities include more than safeguarding bank accounts and distributing property. A trustee may also need to identify and pursue money or property owed to the trust. This can include unpaid loans, contract rights, rent, business obligations, reimbursement claims, or property held by another person.

The trustee should begin by determining whether the claim belongs to the trust. Relevant documents may include promissory notes, deeds, account statements, leases, contracts, tax records, emails, and the settlor's financial records. Informal family arrangements can be especially difficult because the parties may disagree over whether a transfer was a loan, gift, advance, or shared expense.

Once a potential claim is identified, the trustee should evaluate its legal and financial value. Relevant considerations can include the amount owed, available evidence, applicable deadlines, the debtor's ability to pay, likely litigation costs, and the possibility of settlement. A trustee is not necessarily required to pursue every disputed dollar regardless of cost.

However, ignoring a valuable claim without investigation can create fiduciary concerns. Beneficiaries may argue that the trustee failed to protect trust property or favored the person who owes money. These concerns become more significant when the debtor is the trustee, a beneficiary, a relative, or a business connected to the trustee.

The trustee should document the investigation and the reasoning behind the decision. If the claim is pursued, the trustee may send a demand, negotiate payment terms, file a creditor claim, commence litigation, or seek instructions from the probate court. If the claim is compromised or abandoned, the file should explain why that decision was considered reasonable for the trust.

A trustee duty to enforce claims does not eliminate the possibility of a practical resolution. A negotiated repayment plan may preserve more value than extended litigation, particularly when the debt is supported by documents but immediate collection would be difficult. Any settlement should be evaluated based on the trust's interests rather than family pressure or personal relationships.

Key takeaways:

• Trustees should investigate credible claims involving money or property owed to the trust.
• The cost and collectability of a claim may affect whether litigation is reasonable.
• Decisions involving insiders should be carefully documented and evaluated for conflicts.

This article provides general information, not legal advice. Trustees and beneficiaries should seek guidance promptly because legal claims can be affected by statutes of limitation and other procedural deadlines.

Helpful educational resources:

• https://leginfo.legislature.ca.gov/faces/codes.xhtml
• https://selfhelp.courts.ca.gov/civil-lawsuit
• https://www.courts.ca.gov/forms.htm

Call Westlake Law Group at (818) 444-2022. We assist trustees and beneficiaries in Ventura County with disputed loans, trust property claims, fiduciary investigations, settlement discussions, and probate court petitions. 30699 Russell Ranch Road, North Building, Suite 210, Westlake Village, California. Virtual consultations are available throughout Southern California.