Serving as a trustee is a big responsibility that can be complicated and confusing. It’s easy to fall into trouble if you’re misinformed or careless in the trust management. Keep in mind these three pitfalls when serving as trustee:
- Breaching fiduciary duties. Fiduciary duty is the highest legal duty of care recognized by the U.S. legal system. The most common example of breaching duties is when a trustee uses the trust to pay for personal expenses or purchases.
- Failing to keep beneficiaries informed. Trustees have the duty to keep beneficiaries “reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.” Thus, beneficiaries are entitled to periodic accountings showing investments, disbursements and expenses. If a trustee is not transparent with these actions, he or she may be subject to legal action.
- Breaking the law. This can involve theft – the most common way a trustee may break the law – or the failure to pay taxes.
A trustee who doesn’t act in the best interest of the trust may be subject to consequences in civil court. The most common of these – for trustees who are also beneficiaries of an estate – is a surcharge, which is a legal term under probate law for a type of lawsuit that will reduce the trustee’s portion of the inheritance to return any losses to the trust that have been incurred because of mismanagement by the trustee. A trustee can also be personally liable for losses resulting from mismanaging assets in the trust.
If you’re concerned that a trustee is mismanaging your loved one’s trust, it’s important to seek help immediately from an experienced probate attorney.
Many people want to avoid going to court to resolve their probate issues, but probate court exists to help families sort through the process of settling an estate. In fact, probate court can be particularly beneficial when a trustee is either a family member or a friend, because emotions and stress can complicate these situations.
If you’re a trustee and feel over your head in fulfilling your duties, attorneys can help you avoid pitfalls. You don’t have to do it alone. Consider hiring an attorney, bookkeeper, accountant or even a corporate trustee to work with you. A little bit of help can prevent not only mistakes but undue stress during an already-stressful time.