So, you want to be a trustee of an irrevocable trust? Or perhaps you want to name an individual trustee for the Family Trust? After all, “it’s cheaper to have a family member be trustee.” After all, “my kids won’t fight over money. Everyone gets along.”
Being asked to serve as trustee of a family trust may first appear as an honor but many times it turns into a nightmare. A nightmare that often includes fractured family relationships. Case in point:
- About 10 years ago, an Advisor’s client was asked to be named as successor trustee of mom and dad’s trust. Upon mom and dad’s passing, the client was now an active role.
- The trust benefits mom and dad’s four children; the trustee is the oldest child.
- The oldest child as trustee thinks it’s an economical idea to keep all assets in one account and not carve out four separate trusts for the siblings; thus, each child sees what his/her siblings are receiving from the trust; this causes jealousy, concern and problems.
- The trustee has his own investment philosophy – he’s not a big fan of the stock market – “too risky;” the trust is designed to last for the lives of the beneficiaries; because of the trustee’s ultra-conservative view on financial markets, it is hard to see the trust assets grow – and this is making the trustee’s siblings very angry.
- In addition to owning his real estate company, the trustee is an avid fisherman – doesn’t matter what kind of water, he schedules several fishing trips a year and they are usually for about 10 days each; when he’s away, he is inaccessible and the beneficiaries of the trust “just have to wait” if they have questions or need information; naturally, this irks the siblings.
- The trustee’s brothers and sisters admittedly do not understand how the trust works; two of them are going to retain an attorney for advice and to try and dismantle the trust; this action further splinters the brothers and sisters as some contend this was never the intention of mom and dad.
After returning from a fishing trip, the trustee decides to meet with his attorney to get advice if he is administering the trust properly. The attorney expresses concern about the trustee’s handling of the trust. In fact, he tells his client that as trustee, legal predicaments with the siblings could be brewing. The attorney outlines what the client should be doing as trustee:
- Safeguarding and distribution of assets
- Making distribution decisions from the trust based on the language in the trust
- Separating the trust into as many accounts as there are beneficiaries
- Keeping precise records and providing full accounting to beneficiaries
- Managing investments and liquidity needs
- Paying expenses, as well as filing and paying taxes
- Maintaining and selling real estate
- Overseeing business interests
- Resolving beneficiary disputes
- Communicating with the beneficiaries and possibly their CPAs, attorneys and other professionals
The client as trustee realizes that despite the wonderful bounty of wealth that his mother and father left for their children, mom and dad may not have completely thought out the role and responsibilities an individual trustee will face in managing the wealth. The client who originally thought he could handle the chores of being a trustee and his siblings has something of an epiphany and realizes that he might not be the guy to serve as a fiduciary. He has a life that demands time and attention. He has a family. He has a job. He has more fish to catch. At the suggestion of his attorney, the client realizes that a professional trustee may make more sense for the trust and for the peace and stability of the family.
For more information, please contact:
Jacqueline Jenkins, CTFA
Chief Fiduciary Officer / Managing Director
Phone: 561-515-6156 / Email: firstname.lastname@example.org
The posts expressed are views of FSTC and are not intended as advice or recommendations. For informational purposes only.