Before you start reading, here are some definitions to help you understand your role. A trust is a legal contract created by a trust maker. You, the trustee, are overseeing and properly managing the assets in the trust. The assets in the trust are then given to the beneficiaries. A will is defined as a statement of a persons wishes before death or incapacity. An executor is an individual or entity that is appointed to carry out wishes noted in a will. The following tips are gathered from What to do When a Loved One Dies by Robert D. Vale, Stefani C. Coggins, and Brett S. Lytle, an instruction manual for executors and successor trustees.
1. Duties of a Trustee. There are many articles that go in-depth on the duties of a trustee. To quickly summarize, you are first and foremost bound to deal with the trust as a prudent person and utilize your expertise when necessary. You should always follow the trust exactly and put the trust first, an do not delegate your responsibilities to anyone else other than the co-trustees. As trustee, you are also duty bound to inform each beneficiary only with respect to that beneficiary’s interests, and you should have a separate band account(s) for the trust so that assets will remain identifiable. It is also your duty to consult with professionals if needed, especially for properly interpreting terms of the trust and preserving the trust assets. Lastly, be sure to know that any slight sign of impropriety with respect to the trust will not be taken lightly in court.
2. Booking. It is necessary to keep an accurate set of books that document the trust administration, which will benefit you and the beneficiaries. You should engage an accountant or professional if need be, and make sure that records will show all assets you receive, hold, and disburse, along with the date, amount, and explanation of each.
3. Conduct of a Trustee. If you are titled to trust assets, the title should be vested in “[Trustee’s name], trustee, under the [Trust name], dated [Trust date].” Always sign your name as “[name], Trustee” on any documents in regards to the trust. As long as the trust promotes legal activity, your first source of authority is the trust itself. Your second source of authority comes from your state Probate Statutes, and your last source of authority is court decisions, or the “common law”. If you are a trustee in California, be aware that you must notify all trust beneficiaries within 60 days the trust becomes irrevocable (i.e. the trust maker has passed away or is incapacitated). Make sure to inform the beneficiaries that a copy of the trust is available, and that they have 120 days to file a contest or objection to the terms of the trust.
4. Compensation for a Trustee. You are entitled to compensation for your services. If the trust does not explicitly say what your compensation entails, then Probate Code Section 15681 provides that you, as trustee, are entitled to “reasonable compensation”. This reasonable compensation varies from situations to situation, but determining factors include the success/failure of the Trustee’s administration, the time spent on Trustee’s duties, the loyalty/disloyalty of the Trustee (i.e. you put the beneficiaries’ interests before yours), and more. Note that you are not required to take compensation. If you do, trustee fees are taxable as ordinary income, and make sure to report your compensation in your income tax return.
5. Avoiding Potential Liability. To avoid potential liability, be sure to report early and often to the beneficiaries by keeping them updated on your activities and progress. Document all transactions, and be sure to include the reason behind making or not making distributions. Lastly, before making or abstaining from any actions, be sure to think about the possibility of a lawsuit. You are handling someone else’s inheritance, and beneficiaries can early blame you for your actions out of the anger and frustration they may feel.
These tips are not exhaustive and do not constitute as legal advice. If you would like to purchase the instruction manual from which this article was based on, please click this link which will direct you to the Book Depository website.
Should you have any questions or would like to learn more, please feel free to consult with one of our attorneys at McDowall Cotter or give us a call at (650)572-7933. Our experienced and knowledgeable staff are eager to help you with any of your needs or concerns.