Trusts are popular estate planning tools to ensure that families and assets are taken care of when someone passes away. Whether it’s providing for children, endowing charities, or managing real estate, those who create trusts have specific wishes that they expect to be followed, and they expect the trustee to carry out their plans.
But, being a trustee can be a thankless job, not to mention one that can thrust a person with good intentions into the cross hairs of litigation. Courts are filling to over-capacity with cases against trustees, and the matters can get quite complex.
If you are asked to be a trustee, first understand that someone held you in very high esteem and had confidence that you could oversee his or her legacy and assets. Second, be sure you know what being a trustee entails. It can get very complex, very fast.
With this in mind, here are a few tips that might help make your trustee-ship progress more smoothly.
1) Read the trust. Seems pretty basic, but you might be surprised at the level of detail and complexity contained within a trust. The trustee is obligated to administer the trust strictly by its terms. Not all trusts are the same; if possible, read the document with an attorney familiar with trust administration.
2) Keep track of your time. Some trusts are specific as to how much the trustee is to be paid (e.g., a fixed fee or percentage of the value of the assets). But some trusts, especially those drafted several years ago, may permit the trustee to receive “reasonable” compensation. What is reasonable? Ask 10 people and you’ll get 10 different answers. To avoid possible confusion or challenges, track your hours spent acting as trustee. If there is a dispute as to the trustee’s compensation, at least you’ll be able to demonstrate the actual time spent on trust matters.
3) Provide annual accountings. Every year, be sure to provide the beneficiaries with clear written accountings, which explain the income and expenses of the trust. Why is this important? First, it is required by statute. Second, once the accounting is served on the beneficiaries, the statute of limitations begins to run on claims challenging the accounting. If you don’t serve the accounting, the statute of limitations to file a challenge doesn’t start and you can be on the hook for a long time.
To continue reading: BEING A TRUSTEE IS A THANKLESS JOB: Six Tips on How to Handle the Responsibility and Potential Liability (Part 2)
For more information speak with our Trust Attorney in Los Angeles today.