There’s an old saying that the two best days in a boat owner’s life are the day they buy their boat and the day they sell it.
Forbes’ recent article entitled “How To Be An Effective Trustee” says that a similar notion applies to being a trustee – it’s an honor to be named and then a huge relief when it’s over. That’s because being a trustee is difficult.
Remember that a trust is a fiduciary relationship in which one party (the trustor) gives another party (the trustee) the right to hold title to property or assets for the benefit of a third party (the beneficiary). Trusts are created to provide legal protection for the trustor’s assets, to make certain those assets are distributed according to the wishes of the trustor, and to save time, reduce paperwork and, in some cases, avoid or reduce inheritance or estate taxes.
Being a trustee requires knowledge about a wide range of topics, including:
- The trustee’s fiduciary duties, which include loyalty, impartiality, duty of care, protection of trust property, enforcement of claims and the duty to inform and account to beneficiaries, among others (violation of these duties exposes the trustee to liability).
- Understanding the details of the trust, like the specifics of the distribution instructions.
- Investments and the ability to engage and monitor investment managers.
- Administrative matters, such as record keeping and principal and income accounting.
- Estate planning, trusts and the basics of the estate, gift and generation skipping taxes.
- Income tax, including how trusts are taxed both by the federal government and the state.
A trustee must also be able to productively communicate and work with the beneficiaries on their financial wellness and distribution needs, which is an area that can be full of conflict.
It’s a daunting list. For most laypeople, becoming a Trustee could not only become a headache, but potentially land them in legal jeopardy! As a fiduciary, you are held to a standard of care as to the beneficiary of trust. Suppose upon death, the trust was funded by the decedent's estate and you become Trustee. You figured the investment profile was fine; then the market crashed and the trust lost 30% of its value. Will you be the target of a lawsuit?
Aside from potential legal problems, perhaps accounting isn't your forte and you let your paperwork go: In this instance you've once again breached your duty of care. For years, banks had local Trust departments that could help out; but nowadays banks either don't provide the services or the trustee is not local. He might visit the branch once a quarter! To the fill the gap, Attorney Robert W. Haley of our firm took the steps to be certified as:
- Master Certified Independent Trustee
- Accredited Trust Financial Advisor
He has years of experience acting as fiduciary to many of our clients. So, if you need someone to serve as your Trustee, Agent, or Executor, we can help! Schedule an appointment in office to discuss your situation in detail.
Reference: Forbes (May 31, 2022) “How To Be An Effective Trustee”
Suggested Key Terms: Estate Planning Lawyer, Inheritance, Asset Protection, Trusts, Trustee, Estate Tax, Gift Tax, Generation Skipping Tax
