The problem with being a trustee

The problem with being a trustee is that despite being closely related to the trust beneficiaries, you still have a fiduciary duty

Dear Len & Rosie,

My father passed away a year ago. He had a living trust and my brother is the trustee. There are five children surviving. My mother is also deceased. After my dad’s death, my sister, my brother the trustee and I began clearing the house of forty-five years worth of possessions. We took out two dumpsters of garbage, and gave loads and loads of items to the Goodwill. This took us many emotional months to accomplish. Our other two siblings were not interested in helping and when asked if they wanted anything responded by telling us to take whatever we wanted. The valuable items were divided - we got first choice as the other two were not interested - but we did give them a share.

Now my brother the trustee received a certified letter from our oldest sibling stating that she is entitled to an accounting of the distribution of the items. We do not know her motive. She may request some of these items or maybe she wants money. What is our legal obligation to her request? Isn’t the trustee entitled to divide the items as he believes is fair?

Annette

Dear Annette,

The problem with being a trustee is that despite being closely related to the trust beneficiaries, your brother is still a fiduciary. He’s like the person standing behind the counter at the bank. He owes each beneficiary a fiduciary duty, which is equally a duty of competence (don’t mess up) and a duty of loyalty (treat all beneficiaries fairly).

As we have told readers before, a trustee of a trust has as much work to do as the executor of an estate in probate. The advantage of a trust is that your family gets to avoid the built in time delays of probate, as well as the statutory probate fees that are very lucrative for lawyers.

A trust also gives a family the opportunity to cut corners. If everyone gets along, trust administration could be little more than a paperwork drill of paying off debts and taxes and shoveling everything into the names of the beneficiaries. But the decision as to whether or not to take the “quick and dirty” route isn’t one your brother the trustee gets to make. Trust beneficiaries are entitled to an accounting, and if your older sister did not waive an accounting, she’s still entitled to one.

Your brother has a choice. He can either attempt to provide your sister with an accounting, or he can ignore her and hope she’ll go away. Just understand that if she hires a lawyer and petitions the court, there is a very good chance the judge will order a full accounting. Your brother can argue that your sister waived a trust accounting, at least with respect to the personal possessions, but he hasn’t got anything in writing.

People like your sister who are unwilling to pitch in and help the family when there’s an illness or death are the same people who insist on squeezing every last dime out of a trust or estate, no matter how much work others have to do. Both behaviors are an expression of selfishness. The lesson here is that trustees should seek legal help when administering a trust, if only to make sure that they are doing everything correctly and that if they cut corners, they aren’t going to expose themselves to future liability.

Len & Rosie

What to do when a parent refuses to let you know their plans after death

Dear Len & Rosie,

My father is 90 years old, divorced, and lives in a retirement center. My sister and I are his only children. He has been reluctant to tell us of his plans for his final days here on Earth. I know that he has a paid up insurance policy and I have the policy number. When I called the insurance company in San Ramon, they refused to give me any information. My sister and I do not have the means to bury him without some financial assistance, and he will have some expenses that will need to be paid. What can we do in the event he passes away?

Lynetta

Dear Lynetta,

The insurance company won’t talk to you for the simple reason it owes your father a duty of confidentiality. They just can’t spill the beans about his life insurance when anyone calls. Just because you’re his daughter doesn’t mean you have the legal authority to access your father’s private financial information and legal documents. You could do this if your father gives you a power of attorney or if he becomes incapacitated and the court appoints you as his conservator.

Unless and until that happens, it’s up to your father to decide whether or not he should clue you in about his finances and his estate planning documents. What you should do is to talk to your father about this and try to convince him that he should trust you and allow you to help him. You should be careful about this. It’s apparent that your father is a very private man. He could disinherit you if he decides that you’re too “pushy.” Make sure that he understands that you will respect his wishes no matter what they are. You and your sister should act together on this, so your father won’t think that you’re trying to get everything for yourself.

If your father refuses to let you know what his plans are, there’s nothing you can do about it unless he loses mental capacity and is put into a conservatorship. You and your sister may have to pick up the pieces after your father’s death. Finding his financial information and estate planning documents could turn into a morbid scavenger hunt where you have to lift up his mattress to look for his safe deposit box key. Tell your father that if he won’t clue you in he should at least be organized enough to make it easier for those who will have to manage his estate after his death.

The only consultation we can give you is that you don’t have to do it. You and your sister will not be liable for your father’s debts after his death, and you do not have to manage things if you do not want the responsibility, even if you are named as executor or trustee in his will or trust. You can, however, be compelled to pay your father’s cremation or burial expenses because you are his next of kin.

Len & Rosie