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Tim Alles
Jordan Bush
Chris Shourds
Previous Newsletters
April 2021 Does My Estate Plan Have An Elephant In The Room? (Part I)
March 2021 How Can I "Trust" My Trustees?
February 2021 What Do Tiger Woods' Tweets, and Your Social Media Content
Have to Do with Estate Planning? (Part II)
January 2021 What Do Tiger Woods' Tweets, and Your Social Media Content
Have to Do with Estate Planning? (Part I)
December 2020 What Are Estate Taxes And Why Do They Matter?
November 2020 What Life Events Should Trigger an Estate Plan Review?
October 2020 My Child Is A Spendthrift. What Can I Do To Protect Their Inheritance?
September 2020 What Is the Difference Between Estate Planning and Elder Law?
August 2020 Estate Planning After a Divorce - What Does It Mean for Your Estate Plan?
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
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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.
Read more…
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.
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