Tim Alles

Jordan Bush

Chris Shourds

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Previous Newsletters

July 2020 What Should You Expect From Your Trustee?


June 2020 Should You Pass Your Assets Through A Trust Or A Will?


May 2020 Important Issues To Consider For Your Estate Plan


April 2020 Important Estate Planning Considerations During a Pandemic Crisis


March 2020 How Do I Make Decisions about End-of-Life Care?


February 2020 When Should I Consider Changing My Power of Attorney?


January 2020 What is undue influence, and do I have a case?


December 2019 Should You Consider A Special Needs Trust?


November 2019 Are Celebrities Really Different When It Comes To Families Fighting Over Estates?


October 2019 Can You Imagine Challenging Your Parent’s Will?


September 2019 When Should Long-Term Care Planning Begin?


August 2019 Keeping Your Family Out of Probate Court


What Should You Expect From Your Trustee?

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It is very common to have relatives and close friends named as trustee(s) in estate documents.  A trustee is responsible for managing and distributing the assets in a trust. So, it makes sense that a loved one or close friend would be chosen as a trustee. If you are or may become the beneficiary of a trust or a trustee, or need to choose a trustee, it is important to understand what this responsibility means.

 

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When a loved one passes away, or becomes incapacitated, if they have a trust, the individual named as the trustee, will step into the role of administering the trust. The trustee will manage the trust property, as well as distribute property to beneficiaries, in the manner instructed by the trust document. The trustee will have a fiduciary duty.

What Are Fiduciary Duties Of A Trustee?

Trustees have a “fiduciary duty”, which means that they need to act in good faith, and with the highest ethical standards, to perform duties and administer the trust.  There are several elements that encompass a fiduciary duty. It is critical that each one is met to protect the well-being of the beneficiaries and the estate. The following is an overview of the fiduciary duties of a trustee.

Duty of Loyalty

The trustee has a duty to be loyal to the beneficiaries of the trust. This includes managing the trust property in a manner that has the interests of the beneficiaries as the top priority.

 

For example, a trustee may not act to benefit the interests of one beneficiary over the others.   Additionally, a trustee may not make investments that benefit an outside party, instead of the trust; or commingle trust assets with their own. They certainly should not use or assign the trust property for their own personal use.

Duty of Care

Trustees have the responsibility to make decisions regarding trust management that protects the property and the inheritances of the beneficiaries. The duty of care requires that these decisions be made as another reasonably prudent person would make them. This is also referred to as the duty of prudence.  

 

Trustees may not have the experience or knowledge that they need to make prudent decisions. Therefore, it is part of their duty to request guidance from a trusted and qualified party or professional.  For example, if a trustee makes an investment decision that significantly reduces the trust assets, and they have not sought out the guidance of a qualified professional, then they may be deemed to have breached this duty of care and prudence.

Duty of Full Disclosure

Beneficiaries have the right to know what is happening with the trust and the status of the trust property. For this reason, a trustee has the duty to provide full disclosure to the beneficiaries regarding how the trust is being administered and the results of such administration. Generally, disclosures must happen at regular intervals or when requested by the beneficiaries.

What Are Penalties For Breaching Fiduciary Duties?

Serving as a trustee and meeting all aspects of the fiduciary duty is an important responsibility. It is necessary for the trustee to understand the requirements needed to meet their fiduciary duties.  This includes requesting assistance if they do not have the specific expertise needed to meet the duty of care required.

 

If they fail to do so, beneficiaries may have the right to seek legal redress from the trustee.

This can involve a complex and costly legal process. It is important to consult with a local estate planning attorney, to review the specific circumstances of the case, and determine if further action should be taken against the trustee for a breach of fiduciary duty.

 

Important Information: The information contained in this newsletter, and any related web page(s), is for general information purposed, by its nature, and does not contain any legal or tax advice. It is written to be accurate and educational. This newsletter may not be construed as legal or tax advice, or solicitation for legal or tax services of any kind. For this reason, no attorney-client relationship is created, and no one should take any legal, tax or other action, based on the information contained in this newsletter or any related web page(s), until having consulted competent professional advisor(s) and attorney(s). Some links in the newsletter may lead to other places on the worldwide web, that are for informational references only. We do not necessarily sponsor, endorse or otherwise approve of the materials appearing in such sites. Nothing contained in this newsletter and any related web page(s) is intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties under the Internal Revenue Code. No information contained this newsletter and any related web page(s)relating to any federal tax matter may be used by any person to support the promotion or marketing or to recommend any federal tax matter. Taxpayer(s) should seek advice based on the taxpayer's particular circumstances from an independent tax advisor with respect to any federal tax transaction or matter described in this newsletter and any related web page(s).


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