How can beneficiaries challenge a trustee who misuses trust funds in South Dakota? | South Dakota Estate Planning | FastCounsel
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How can beneficiaries challenge a trustee who misuses trust funds in South Dakota?

August 6, 2025 2 min read

Disclaimer: This article provides general information and is not legal advice.

Detailed Answer

Under South Dakota law, trustees owe beneficiaries strict fiduciary duties of loyalty, prudence, and impartiality. If a trustee misuses trust funds, beneficiaries can ask a court to intervene. The South Dakota Uniform Trust Code (SDCL Chapter 55A) outlines several remedies.

  1. Request a formal accounting. Beneficiaries may demand detailed records of all transactions under SDCL 55A-7-603. This forces the trustee to disclose bank statements, investments, and distributions.
  2. Petition to remove the trustee. If the trustee engaged in self-dealing, waste, or wilful misconduct, beneficiaries can seek removal. Grounds for removal appear in SDCL 55A-7-702, and court procedures follow SDCL 55A-7-703.
  3. Seek surcharge or restitution. If misuse caused losses, beneficiaries can request reimbursement via surcharge under SDCL 55A-7-607. The court may order the trustee to restore the trust to its proper value, including interest.
  4. Freeze trust assets. In urgent cases, beneficiaries can ask for injunctive relief or a temporary restraining order to prevent further dissipation of assets while the dispute is pending.
  5. Appoint a successor trustee. When removal occurs or the trustee resigns, the court can name a neutral successor under SDCL 55A-7-704, ensuring proper administration going forward.

To strengthen your case, gather trust instruments, bank records, communications with the trustee, and any evidence of mismanagement. Courts assess the trustee’s conduct against the trust terms and statutory duties when deciding on removal or surcharge.

Helpful Hints

  • Read the trust document closely to identify trustee powers and restrictions.
  • Keep organized copies of all financial statements and correspondence.
  • Act quickly: South Dakota law may impose time limits on challenging trustee actions.
  • Consider mediation to resolve disputes efficiently and reduce legal fees.
  • Consult an attorney knowledgeable in South Dakota trust law for tailored advice.

The information on this site is for general informational purposes only, may be outdated, and is not legal advice; do not rely on it without consulting your own attorney.