Wiping Out A Trust Fund Through Litigation

When you deal with trust fund administration, there is a lot that can go wrong. The typical pitfalls are usually related to the fact that the beneficiary of the trust is not the one who made the money that got submitted into the trust as principal, meaning there is no indication that the person receiving the money has the sophistication to adequately manage financial affairs.

The other pitfalls typically relate to traditional agency issues—the person who makes investment selection and distribution decisions for the trust fund (the trustee) is not the same person that is actually receiving the money (the beneficiary) so problems can arise from this disunity of self-interest. The self-interest for the trustee is to keep as much money in the trust fund as is permissible, as most banks and trust fund administrators charge a certain percentage of the assets each year.

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