WHY YOU SHOULD SAY “NO” TO TRUSTEESHIP

Your aging aunt has asked you to be trustee of the trust she set up for her spendthrift daughter.  “Why not?” you think.  Think again.  As a laymen, Trusteeship over another’s trust is a burdensome job, fraught with potential personal (read: you pay) liability.

In addition to the trust provisions which lay out your duties and obligations, California imposes very strict guidelines and protections which, in aggregate, are referred to as fiduciary duties.  They include:

Duty to administer trust

Duty of loyalty

Duty to deal impartially with beneficiaries

Duty to avoid conflict of interest

Duty not to undertake adverse trust

Duty to take control of and preserve trust property

Duty to make trust property productive

Duty to keep trust property separate and identified

Duty to enforce claims

Duty to defend actions

Duty not to delegate

Duty with respect to cotrustees

Duty to use special skills

Each duty above imposes very strict and nuanced responsibilities on California trustees. These are onerous, and often easily and inadvertently breached by a layman. Moreover, if the trustee is also a beneficiary of the trust, they will subject to much harsher scrutiny.

If a trustee is sued for breach of his or her fiduciary duties, he or she may be forced to disgorge any trustee fees taken, may have to pay out of pocket for any damage incurred to the beneficiaries as a result of the trustee’s actions, and may in fact be liable for punitive damages. Furthermore, once one has accepted the position of trustee, they may necessarily become a liaison between hostile beneficiaries (usually family members) which can have an emotional toll on the trustee – particularly if the trustee is related to the beneficiaries.  Sides may be taken, and familial relations may be damaged.  Moreover, San Diego courts have begun cracking down on trustee fees; by some accounts, $25/hour is now considered the standard for a lay-trustee.

The best thing a trustee can do to protect themselves is to not accept the position in the first place.  Absent that, a trustee is usually authorized to enlist professionals – financial advisers, accountants and lawyers – to assist with prudent and lawful management of the trust.  These professionals are paid from the trust assets, rather than by the trustee him/herself.  A good team of professionals will not only lighten the burden of trusteeship, they will ensure that a trustee complies with his or her fiduciary duties.

 

 

 

 

 

 


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