Beneficiaries often request a trustee to grant them a loan on trust property. In times of economic downturn, such requests are even more frequent. As a general rule, a trustee should not want to make a loan to a beneficiary, as he should assume that the beneficiary will default and the trustee will then be placed in a situation where he will have to collect a debt from a beneficiary, a person. to whom the trustee has a fiduciary duty. However, the trustee may be pressured to grant such a loan: the loan document may require it or suggest that it be the same, the beneficiary may have the right to revoke the trustee, the grantor may wish that the loan happens, the trustee may like the beneficiary and want to help, the trustee may have other non-fiduciary relationships with the beneficiary or the beneficiary’s family, etc. A beneficiary or others can put pressure on the trustee to lend.
Many different issues arise from this type of transaction: the duty of a trustee to obey the terms of the trust, the statutes and the common law; the duty of a trustee to properly manage the assets of the trust; the obligation of a trustee to work with co-trustees; the duty of impartiality of a trustee towards several beneficiaries; the duty of a trustee to exercise due diligence; the ability of a trustee to limit the risks associated with such a transaction; a right of trustees to make distributions and care for a beneficiary; and the right of a trustee to set off debts owed by a beneficiary. This article addresses these many concerns and provides suggestions for trustees who find themselves in this unenviable position.
Please see the full article below for more information.
