Understand What’s At Stake Before Agreeing to Serve as Trustee
When my office creates an estate plan for families, we often end up using one sort of trust or another. The most important conversation in that planning is not really about who gets what, but who will act as the trustee.
Being asked by a family member or close friend to serve as trustee for their trust upon their death can be an incredible honor. At the same time, however, serving as a trustee can be a massive responsibility—and the role is not for everyone.
In fact, depending on the type of trust, the assets held by the trust, the specific terms of the trust, and the beneficiaries named, the job can require you to fulfill a wide range of complex (and potentially unpleasant) duties over the course of many years. What’s more, trustees are both ethically and legally required to properly execute those duties or face liability.
Given this, agreeing to serve as trustee is a decision that shouldn’t be made lightly. Indeed, sometimes the best thing you can do for everyone involved is to politely decline the job. Remember, you don’t have to take it. That said, depending on who nominated you (mom or dad, for example), declining to serve may not be an easy or practical option. Or you might enjoy the opportunity to be a trustee, so long as you understand what it entails.
It’s best to make your decision about serving as trustee with eyes wide open.
Here’s a brief look at what the job will likely entail, along with some situations where you might want to seriously think twice about agreeing.
What a trustee does
As mentioned earlier, a trustee’s duties can vary tremendously depending on the size of the estate, the type of trust, and the trust’s specific instructions. All trusts are not the same. That said, every trust comes with a few core requirements, primarily revolving around accounting for, managing, and distributing the trust’s assets to its named beneficiaries.
Regardless of the type of trust or the assets it holds, some of a trustee’s key responsibilities include:
- Identifying and protecting the trust assets (for example, digital assets, physical property, special collections, IRAs, and so on)
- Determining what the trust’s terms actually require you to do
- Managing the trust assets for the term specified and distributing them properly
- Filing income and estate taxes for the trust
- Communicating regularly with beneficiaries
- Being scrupulously honest, highly organized, and keeping detailed records
- Closing the trust when the trust terms specify
Ultimately, trustees have a fiduciary duty to properly manage the trust in the best interest of all the trust beneficiaries. Consult with us for more in-depth details regarding the duties and responsibilities a specific trust will require of you as trustee.
Can I get help?
Fortunately, you’re not expected to go it alone: Trustees are encouraged to seek assistance from outside professionals to fulfill their duties. Remember, you do NOT need experience in law, finance, or taxes to serve as trustee. And while you won’t be able to profit from the job, you are able to be paid for your role as trustee.
That said, many trustees, especially family members, choose not to accept any payment beyond what’s required to cover the trust expenses. Yet, this all depends on your personal situation and relationship with the trust’s creator and beneficiaries, and of course, the nature of the assets in the trust. In either case, however, you won’t have to use your own funds to get the job done.
How do I know if the trustee role might be a bad idea?
Given the sense of loyalty and filial responsibility that’s often involved, it might feel difficult to turn the trustee role down. But for a number of reasons, saying “no thanks” can sometimes be the best decision, not only for you, but for all parties involved.
Of course, this is an entirely personal decision and one you’ll ultimately have to make for yourself after considering all of the factors. That said, here are a few red flags that can signal the role might be better fulfilled by someone other than you:
- Your job, family, and/or health situation is such that you won’t be able to give the job the time and attention it deserves. Some trusts can require far more work than others, and if the role would seriously impede your own life, you might consider declining.
- You don’t get along with the beneficiaries. If there are underlying conflicts or bad blood with the people you’ll be required to serve, this could make the job incredibly difficult and unpleasant for everyone. It can be even worse if the trust calls for you to manage funds for a person you can’t communicate with.
- The trust’s terms are vague and/or unclear, leaving you in the position to make difficult decisions you don’t feel qualified to make. Such grey areas are especially troublesome when it comes to distributing trust assets to young adult beneficiaries, who might not be the most responsible with their spending and/or lifestyle. And, Special Needs Trusts may have specialized language or requirements.
- It’s not clear exactly what assets the trust creator (grantor) owned, and/or the estate is highly unorganized. Tracking down and managing unorganized and/or poorly funded assets can be a massive undertaking—and potential liability.
- Lawsuits are likely or already underway. As trustee, it’s your duty to defend the trust against lawsuits, and just doing this can be a huge expenditure of your time and energy. What’s more, if a lawsuit against the trust is successful, it could seriously reduce the trust’s value, making your job infinitely more challenging.
We can help you decide
Given the serious nature of a trustee’s responsibilities, you can meet with us as your Personal Family Lawyer® for help deciding whether or not to accept the job. We can offer a clear, unbiased assessment of what will be required of you based on the specific trust’s terms, assets, and beneficiaries.
And if you do decide to accept the trustee role, we can guide you step-by-step through the entire process, ensuring you effectively fulfill all of the grantor’s wishes with minimal risk. Serving as trustee can be a lot of work, but if you go into the job with eyes wide open and have the proper guidance, it can be an immensely rewarding experience. Contact us today to learn more.
Call us today at 919-883-2800