Disclaimer: This article is for informational purposes only and does not constitute legal advice.
Detailed Answer
Under Hawaii law, beneficiaries who suspect a trustee of misusing trust funds have several legal tools. The Hawaii Uniform Trust Code (HUTCA) outlines a fiduciary duty requiring trustees to act in the beneficiaries’ best interests. To challenge a trustee, beneficiaries generally follow these steps:
- Identify the Breach of Trust: A breach occurs if a trustee misappropriates assets, fails to account for transactions, or invests imprudently. For example, if Trustee Jane uses trust cash to purchase personal property, that is misappropriation.
- Request an Accounting: Under HRS §560:8-813, beneficiaries can demand records detailing all receipts, disbursements, and trust activities. If the trustee refuses or provides inadequate information, beneficiaries gain grounds for court intervention. HRS §560:8-813.
- Gather Evidence: Preserve bank statements, correspondence, and financial reports. Document any suspicious transactions, such as unexplained withdrawals or transfers to personal accounts.
- File a Petition in Court: Beneficiaries may petition the Hawaii court for relief. Common remedies include:
- Removal of the Trustee: Under HRS §560:8-1003, a court can remove a trustee for breach of trust, conflict of interest, or failure to administer the trust properly.
- Surcharge and Restitution: The court can order the trustee to repay misused funds plus interest. This remedy is available under HRS §560:8-1008.
- Injunctive Relief: Stop ongoing misconduct immediately.
- Consider Alternative Dispute Resolution: Mediation or arbitration can be faster and less costly than litigation. Check the trust instrument for ADR clauses.
- Be Mindful of Deadlines: Under Hawaii’s statute of limitations, beneficiaries generally have two years from discovery of the breach to file suit. See HRS §657-1 (HRS §657-1).
Helpful Hints
- Keep detailed records and photocopies of all trust documents.
- Review the trust instrument for specific removal procedures and notice requirements.
- Discuss concerns with co-beneficiaries to share costs and strengthen the case.
- Seek a preliminary meeting with a trust and estate attorney to assess the strength of your claim.
- Check if the trustee has liability insurance that may cover breaches.