It all depends on certain other facts. For example, was the money borrowed from the trust or from mom? If the money was borrowed from the trust, then the trustee has a right to go after unpaid debt it is owed. Further, depending on what the trust document allows, the trustee may or may not be able to deduct the debt from the beneficiaries portion of the trust estate. I highly recommend that you obtain an attorney to review the documents and provide you with concrete answers.
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When looking at a trust, there are always a lot of factors to consider. A trustee has a duty to follow the terms of the trust and to provide for the beneficiaries according to those terms. If the trustee is withholding the distributions only because she thinks that someone doesn't deserve the money, you might have a claim against her. However, if there is a legitimate debt that was owed to your mother, the trustee may be within her rights. I recommend seeing an attorney to help you sort this out. There are plenty of fine attorneys that you can find on Avvo.
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I agree with Attorney Scott. Your sister-in-law, as successor trustee, is bound by the terms of the trust. Even though the money was borrowed during your mom's lifetime, the trust may provide that such loans are to be paid back from the borrowing children's share of the trust estate. Has someone objected to her proposed distribution? Is that why she is withholding distribution?
You may want to consider having an attorney review the trust for you to determine whether or not your sister-in-law is acting properly.
Disclaimer: The above answer does not create an attorney/client relationship. My responses are intended to provide general information about the question posted. I am licensed to practice in the state of California.
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