Whether you are a trust beneficiary or the trustee, you need to know what that means to avoid issues and potentially costly expenses. Trustees have duties—both in the law and outlined in the trust agreement. Beneficiaries have rights—also in the law and outlined in the agreement. These rights and responsibilities aren’t taught in school. So, let’s look at some of them using the lens of Tony Bennett’s pending trust dispute.
Tony Bennett, the celebrated Grammy winner and singer, passed away in 2023. Tony passed his estate to his wife, Susan Benedetto, and his family. Tony’s assets were primarily held in a family trust. Tony’s estate is estimated at $200 million, which isn’t surprising given the longevity of his career. Tony’s estate includes his music catalog, images, artwork, IP, and likely a few businesses.
Tony had four children: D’Andrea “Danny” Bennett and Daegal “Dae” Bennett from one marriage, and Antonia and Johanna Bennett from another. His son, Danny Bennett, was appointed trustee of the family trust, which contained most of Tony’s assets.
Tony’s daughters, Antonia and Johanna, recently sued Danny for his role as trustee. They allege that Danny failed to account for the sales of Bennett's music catalog fully and proceeds from image rights and that he is withholding information about their father’s other assets. They also claim that Danny personally benefited from the estate and received a substantial commission before Bennett’s death for selling memorabilia, raising potential issues related to self-dealing and breaches of the fiduciary duty he owes to the estate. Antonia and Johanna seek compensation for any breaches of fiduciary duty and self-dealing, plus an accounting of all transactions.
Trustee Responsibilities
A trustee is responsible for managing the trust and following the terms of the trust agreement. Trustees owe a fiduciary duty to the trust's beneficiaries. This means they must execute their duties in the best interests of the beneficiaries and follow the trust agreement—even if it is against the trustee’s own interest.
A trustee's duties include handling the trust’s financial affairs, overseeing assets, and distributing assets to beneficiaries. Specifically, a trustee is expected to:
- Maintain Trust Records: Keep detailed accounts of all transactions and activities related to the trust and provide financial reports to beneficiaries.
- Good Communication: Keep beneficiaries informed about the trust’s status and key decisions.
- Manage Trust Assets: Safeguard trust assets, ensure proper investment, and prevent financial losses.
- Handle the Taxes: Handle state and federal tax filings for the trust and pay necessary taxes using trust funds.
- Ensure Legal Compliance: Adhere to relevant trust laws and regulations.
- Distribute Trust Funds to Beneficiaries: Follow the trust agreement’s terms when allocating assets to beneficiaries.
A trustee is legally obligated to act in the best interests of the beneficiaries, avoiding conflicts of interest or personal financial gain from trust management.
Can a Trustee Benefit from a Trust?
A trustee is prohibited from self-dealing. For example, the trustee likely cannot appoint themselves the manager of businesses run by the trust without the appropriate approvals or if they lack the necessary credentials. However, they may still benefit from the trust. For example, a family member serving as trustee can also be a beneficiary. Additionally, trustees may receive compensation for their role as a trustee if the trust agreement permits it.
What Happens If a Trustee Acts Unethically?
Suppose beneficiaries suspect a trustee mismanaged funds, failed to act in good faith, or engaged in self-dealing. In that case, the first step should be to verify suspicions. Ask for an accounting of the assets and review the relevant transactions, spending, etc.
The accounting will show the trust's assets, what’s left, and why. You can use this information to determine if the trustee is hiding assets or has spent them frivolously, fraudulently, or self-dealingly. If the trustee refuses to turn over the relevant documents or simply ignores the beneficiary, this can further confirm suspicions.
Once you confirm or further your suspicions, you have several options, but the first should be to contact a litigation attorney to help protect your rights and initiate legal actions against the trustee. You can sue the trustee for reimbursement of the spoiled assets or the breach of the trustee’s fiduciary duty.
If a court determines a trustee has acted improperly, several outcomes are possible:
- Trustee Removal: The court may replace the trustee with a successor named in the trust or appoint a new trustee.
- Disgorgement: The trustee must return all the profits from their misconduct.
- Personal Liability: If the trustee mismanaged assets or improperly profited from the trust, they may be required to reimburse financial losses.
- Criminal Charges: In severe cases involving fraud or embezzlement, a trustee could face criminal prosecution, leading to fines or imprisonment.
The legal dispute surrounding Tony Bennett’s estate underscores the importance of trustee accountability and fiduciary responsibility. It highlights the necessity for transparency and open communication while affirming beneficiaries’ rights to challenge a trustee suspected of mismanagement or unethical conduct. The job of a trustee is not for the faint of heart. It carries significant responsibilities.