You have assumed the duties and responsibilities of a Trustee and are now hard at work, putting forth your best efforts to honor the wishes of the Decedent(s) and divine the needs of the beneficiaries.
Poorly Written Trusts
Trusts have become commonplace in the past generation. The rise in popularity of revocable living Trusts will likely quickly surpass the use of a stand-alone Will as an estate planning tool. Revocable Living Trusts are inexpensive in comparison to Probate Court costs and allow flexibility in estate planning that Will cannot provide.
Trust documents can vary in quality. They may have been poorly drafted at the time. Or they may have been expertly drafted but have not been revisited decades. As changes in the tax and state trust laws have occurred over the years, they now present unexpected challenges for successor Trustees.
Potential Conflicts
Assuming a Trust is written by an attorney who had a grasp of the law, the Trust terms likely provide the Trustee with some leeway in the administration of the Trust. This can become a double edge sword. Usually, Trust bequests are meant to make beneficiaries happy. But at the same time, the Settlor, or creator of the Trust, likely had some intentions for the beneficiaries use of the Trust funds. They hope that they would be spent wisely, and in ways that increases the beneficiary happiness.
With respect to the disbursement of Trust funds to beneficiaries over time, rather than in a lump sum, Trusts typically contain language like: “funds are given to beneficiaries for their health, general maintenance, education, and support.” The potential for broad interpretation of such terms can lead to friction between the Trustee and a beneficiary. Such words could be construed to include almost anything. They could also be construed to block any request.
Reducing Friction
If you find yourself in this position, as either a Trustee or beneficiary, here are some tips:
- Set expectations early. For both Trustees and beneficiaries, share your ideas of how you expect the Trust funds to be used. Share these early and discuss what things you believe are appropriate.
- Keep records. Whether a Trustee or beneficiary, adequate record keeping helps reduce friction.
- Seek professional help. Whether you are a Trustee or a beneficiary, knowing and understanding your legal rights is an important first step in setting expectations. If you are a Trustee, consider what roles you should handle yourself, and what roles are better suited for experienced professionals. If the Trust has substantial or complex assets, you may consider hiring a financial advisor or financial management firm to assist. Do you have the time and competency to draft accounting statements for the beneficiaries, or should you seek the assistance of a professional fiduciary, or accountant?
Takeaway
If you a Trustee or Trust beneficiary and need some advice on your legal rights, and how to communicate on Trust distributions, Contact CASHMAN LAW today for a free consultation to see how we might counsel you in the administration of a Trust.
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