The short answer is, “Yes.” The better question is: “Should they be acting in both capacities?”
Beneficiaries can, and often are, asked to be the Trustee, or successor Trustee, of a Trust. In cases of multiple beneficiaries, sometimes more than one beneficiary is asked to serve as Co- Trustees. This means they are both the Trust manager (Trustee) and the recipient of the Trust benefits (beneficiary).
Is this a good idea? Anytime a person is acting as both a Trustee and a Trust beneficiary, there is a potential for conflict. This is particularly the case when one beneficiary acts as sole Trustee for other beneficiaries.
In some instances, this arrangement is entirely appropriate. In others, problems arise when the Trustee uses Trust assets to benefit themselves. For example, if the Trustee is designated to receive a specific gift, say rental income from a commercial property, and the Trustee uses Trust funds rather than the rental income to make improvements on the property. Unless a Trust has terms that specifically address this situation, a conflict of interest may arise. More common is when a Trustee lives in a home without paying rent, and that home is supposed to be distributed equally to multiple beneficiaries.
As the legal owner of all Trust assets, the Trustee has the duty to manage them for the benefit of all beneficiaries. The role of Trustee comes with duties of loyalty and fair dealing. Even if a Trustee is acting properly, some actions could be misperceived as improper, simply because of the potential for conflicts of interest.
Being a Trustee can be a thankless job. Many duties and responsibilities come with the job. Failure to adhere to these duties can subject the Trustee to personal liability. If you are a Trustee and are unsure of your responsibilities, contact a probate attorney as you get started, to make sure
you know how to avoid conflicts of interest in the performance of your job. Regardless of whether you asked and agreed in advance to perform this role, or just found out after the death of a Trust creator, the burden is on you to learn your duties and fulfill them. If you are a beneficiary, you too should take the time to learn and understand your rights, or risk being barred from recovery for bad Trustee conduct, if you do not timely raise your legal rights.
Contact CASHMAN LAW today for a free consultation to see how we might assist.
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not reflect the most current legal developments. Please contact CASHMAN LAW FIRM LLLC (Hawai’i)/ CASHMAN LAW LC (California) to consult with an attorney for advice on specific legal issues.