Written by Jeffrey Skatoff • September 29th, 2010
Over past 12 months, we have handled a number of cases involving outright theft of fiduciary funds by personal representatives and trustees. In the case of a probate estate, unless the court has ordered the personal representative to post bond, the heirs of the estate have no recourse if funds are stolen, other than to obtain a judgment against the personal representative, which ends up likely as not collectable. Some jurisdictions in Florida, notably Miami, require all personal representatives to place estate funds in restricted depository accounts or to post bond. Most other jurisdictions in Florida, however, require neither from most personal representatives.
Beneficiaries of trusts have even less protection, because trusts are administered without court supervision, unless a court’s jurisdiction is invoked. Such jurisdiction is invoked in Florida by the filing of a trust complaint. Because trustees serve without bond and without restricted accounts, if a trustee steals funds, the beneficiaries are normally left without a recourse, other than to obtain a judgment against the trustee.
How can beneficiaries protect themselves? In a probate estate, heirs of the estate are allowed to seek information regarding how an estate is being administered, including getting access to bank account statements and other documents. If a personal representative does not comply with the requests for information, in Florida an heir can seek a court order from the probate judge requiring the turnover of the requested information. In my experience, these types of thefts occur over time rather than all at once, so diligence on the part of an heir can sometimes stop this theft soon after it starts.
In a trust case, information can be requested similar to that of a probate estate, but until a trust complaint has been filed, there is no judge to seek relief from. Therefore, a trust beneficiary would have to make requests for the information, and only when the information is not received, file a trust complaint and use the court’s powers to obtain the requested financial information.
If one is drafting a will or trust and wants to make sure that there is no wrongdoing, there are a few simple steps to take. The easiest step is to name a corporate fiduciary as the personal representative or trustee. Even if a rogue trust officer steals the funds, the deep pocket and insurance of the institution should be available to protect the heirs or beneficiaries. Another step is to require that personal representatives and trustees post bond.