I’ve spent a lot of time advising you as to the riskiness of the proposition of becoming trustee of a trust, the ways that a beneficiary can challenge you and your actions, the personal liability you face should you be found liable for a breach of a fiduciary duty and the oppressive and complex rules you must follow in order to potentially avoid a claim of breach. I have written about it, been published and even lectured on the subject, all for the purpose of preparing you for the difficult and thankless job you are about to assume. And yet, I feel that in some respects I have done you a bit of a disservice, for there is a part of the discussion into which I haven’t delved…
A potential client called me last week because he needed help with his mother’s trust. His mother had just passed away and he and his sister were the only beneficiaries of the trust, an even distribution amongst the two. But sister and brother didn’t get along anymore (as is so frequently the case). While brother hoped for a speedy and efficient resolution of his mother’s trust, the sister saw things differently. She had already taken up residence in mom’s house, had begun to take items of personal property that she wanted and had also attempted to remove funds from mom’s bank accounts. By all means, there would be nothing efficient or straightforward about this trust administration.
The mother did, however, attempt to deal with the issue of her two children not getting along by appointing her brother, a retired judge, to act as trustee – a terrific solution to an unfortunate situation. With all of the matters that I handle which involve parents who are oblivious to the possible dissension amongst family members, at least in this situation the mother attempted to avoid discord between her children.
But a problem has arisen—the named trustee, the retired judge, has indicated that he wants nothing to do with the administration of the trust, doesn’t want to get in the middle of the squabble between his nephew and niece and would prefer instead to decline to act in favor of the next successor trustee in line named. Perhaps you can see where this is going? Guess who is the next successor trustee in line? You would be right if you guessed that it is the son and daughter, acting together. The California Probate Code requires that, unless the trust itself says differently, where there are two or more trustees, they must act unanimously. Clearly, unanimity amongst brother and sister is an impossibility.
I have done my best to educate as many people as I can as to the minefield that is being trustee; and while that is done with a fairly honest (although somewhat tongue-in-cheek) attempt at convincing people not to become trustees, the fact of the matter is that being a trustee is very important. And if you or one of your clients agrees to be a trustee, then you or they better darn well do it.
It’s one thing to not know that you have been named trustee; if you weren’t consulted about it and didn’t give your permission, then I don’t see why you should agree to so act. But if the creator of the trust asked you about it and you consented to the appointment and agreed to perform the duties of the trustee, then you absolutely cannot back out after the chance to make a change has passed. If you realize while the creator of the trust is still alive and the trust is revocable that you don’t want to do the job, then let them know and ensure that a change is made. But if that person passes away and you didn’t tell them you were not inclined to do the job, then you need to stick to it.
In the scenario that I just told you about, the retired judge’s declination to act will potentially cost the trust tens of thousands of dollars and further decimate an already tenuous relationship between brother and sister. Do you think that the mother wanted the only assets she had to give to her kids to be wasted away in attorneys’ fees and court costs? Of course not! She asked her brother, the retired judge, probably the most qualified of people to handle the duties, to be trustee and he said yes. And now he wants to back out?!? Are you kidding??
To the estate planning attorneys out there, a word of advice. I am sure that many, if not all of you, already do this, but please advise your clients to get the permission of the people they intend to name as successor trustees before they make the nomination and make sure that those people understand the gravity and importance of the position and the responsibilities that come with the job. You might even want to speak directly to the person nominated and give them a clear description of the job and what would be expected of them. Education is the best way to ensure that there are no surprises later as to what the job entails.
For as much as I try to tell people not to do it, not to become a trustee, if you do say yes, then do the job. The person who selected you as the trustee did so because they trust you to do a good job; they expect that you will follow their instructions; and in some instances they have selected you because you are neutral and can act dispassionately with respect to the internal familial struggles and challenging dynamics. Simply turning a blind eye and claiming that you don’t want to get involved in what could become a contentious administration defeats a major purpose of estate planning.