Here’s a scenario so common you probably know someone who’s gone through it, if you haven’t yourself: Three siblings, Jack, Jill, and Jane, are mourning the recent loss of their elderly parents. Jane, the closest of the three to her parents, was the one they felt most capable of carrying out their wishes, and so they named her trustee of their trust.
With the pain of having lost their parents still fresh, Jane goes about administering the trust estate. But Jack, the eldest (who never got along well with Jane in the first place), feels a little stung that his parents passed over him as trustee. He has a lot to say about how Jane’s going about things, and of course she’s doing everything wrong. Jill doesn’t care who’s in charge; she just knows she’s behind on her bills and needs her share of the money, preferably yesterday.
How Jane proceeds could make the difference between a stronger family unit and a shattered one, surely the last thing her parents would have wanted. As the leader of a law firm dedicated to resolving trust-related disputes and litigation, we’ve stepped in on thousands of situations just like this. Even my own family dealt with something similar.
Evidence points to estate-related litigation being on the rise, and we’ve personally observed an uptick in the number of contested probate matters, often stemming from the actions or inactions of an appointed trustee. If you’re a trustee or in a position to become one—or you’re likely to be involved as a trust beneficiary—you can take steps now to prevent endless family drama and lengthy court battles later.
Each situation is unique and there’s no catchall solution, but below are some common pitfalls we’ve seen trustees fall into and some general points of advice for dealing with them.
Lead With Empathy
When stepping into a trustee role remember that you’re there because everyone has lost someone they love. Acknowledging their reality and showing genuine compassion will set things off on the right foot.
Be Open and Honest With Beneficiaries
The single most important thing to almost any beneficiary is what they’re going to get, how it was determined, and when they’re getting it. The more you can tell them, the better.
Keep beneficiaries informed about the process. When you’ve inventoried the assets, let them know. When you’ve got an initial valuation of those assets, let them know. Once you’ve received the creditor claims, let them know. Make them part of the process. You may even want to have courtesy copies of bank and other financial statements sent to beneficiaries, though it is not required.
It’s important not to over-promise or just say what they want to hear. But one of the most common denominators we’ve seen in trusts gone wrong is a child appointed as trustee putting walls up and failing to communicate. It’s one of the biggest mistakes they can make, as it leaves beneficiaries free to assume the worst. “They’ve closed the curtain, sitting up there in their ivory tower. Why aren’t they talking to me? Something must be wrong. They must have something to hide.” Once that trust has been lost, it’s hard to regain.
In cases like these, the trustee and the beneficiary have both lost someone they loved, emotions are running high, and there’s potential for things to get ugly. The best way to avoid this is to over-communicate and provide transparency and a reasonable timetable for getting things done. It shows that you understand your duties and obligations as trustee and are acting on them.
The Sooner, the Better
It’s natural to need time after the loss of a close relative, and courts are going to give most trustees in most cases a reasonable amount of time to mourn their loss, normally up to one year, reflective of the yearlong mourning period common in many religions and cultures.
The exception to this is a notice of a trust becoming irrevocable, which a trustee is duty bound to provide to beneficiaries within 60 days of a person’s passing. That deadline is important, as any contest of the documents subject to the notice will need to be filed with the court in as few as 120 days, rather than the normal three years.
The bottom line here is that if you’re serving as trustee your obligations begin as soon as you accept the trusteeship, and you’d be well-served to hire counsel to help make sure you’re doing what needs to be done.
Resist the Urge to Commingle Assets
This is an easy trap to fall into, but an easy point to address. Costs are going to add up over the course of an administration, and checks and other monies will come in. It might seem easier to deposit those funds into your account or just pay the expenses yourself, but in the long-run it’s not the best course of action. More importantly, it’s going to provide great cause for your removal as trustee and potential surcharge should anyone seek it.
Inventory and Value Estate Assets
As soon as you’re able, get in touch with the banks, life insurance company, Social Security Administration—anyone who needs to be put on notice about the death. From there, you can do your diligence on the estate assets. Examine bank statements, determine what bills are coming in and what needs paying off, get in touch with property managers, inspectors, and appraisers, and inventory and value all assets and liabilities.
Don’t Make Things Personal
This may be obvious, but it’s something people all too often lose sight of when they lose a loved one. You may not like your sibling, step-parent or step-child, and you may know or have experienced things that you feel justify acting adversely to them, but don’t do it. You’re there to act out what is written, and if you don’t follow what’s written and let your feelings get the best of you, you may be removed.
Call an Estate Attorney
A probate attorney will know all the processes that need to be followed, all the deadlines that must be met, and all the signs to look for to head off a trust dispute. No matter how unique your family situation might be, chances are good that an estate attorney has dealt with one like it before.
Even better, a probate attorney will provide a buffer between you and the beneficiaries, and in most cases can serve as the bearer of any bad news. This allows you to focus more on your role as a member of a family that’s just lost someone important, and not just your role as trustee. Many of the disputes we see could have been avoided with a little more guidance, a little counsel.
Scott Rahn is the Managing Partner of Probate and Estate Litigation law firm RMO LLP. He represents heirs,beneficiaries, trustees and executors. Read more of Scott Rahn’s Thought Leadership here.