Should I accept appointment as successor trustee of a trust? Trustees take on a fiduciary duty, the highest standard of care to which you can legally be held. What am I legally obligated to do as a trustee? What can’t I do as trustee? Am I legally liable as trustee? What rights do the heirs and beneficiaries have vs. trustees? Are there risks in being a trustee? What common mistakes do trustees make?
By James L. Cunningham Jr, Esq.
(with thanks for contributions from Attorney Randy Catanese of Catanese & Wells)
What is a Trustee of a Trust?
A trustee of a trust is legally responsible for managing the trust according to its terms. They can be an individual, a corporate entity, or a combination.
Is it an honor to be named the successor trustee of a trust created by your parents or other loved ones? When asked, shouldn’t you always say yes?
Frankly, no! Certainly, someone needs to settle your family’s affairs after a death and distribute the assets fairly. That someone might be you—but only say yes when you know what you’re getting into.
Many people aren’t aware of what the duties of a trustee really entail. They don’t ask the important questions, like does a trustee have any personal financial risks?
When you become a trustee, you take on a serious obligation and serious personal liability. By law, you now owe a “fiduciary duty” both to trust itself, and more importantly, to the trust’s beneficiaries. Beneficiaries are the people who get stuff from the trust. Beneficiaries have rights, when you are a trustee you have obligations. A “fiduciary duty” is the highest standard of care you can legally owe someone, and it’s the standard by which you would be judged in a court of law, regardless of your expertise in financial and legal matters. You will be held accountable for not only what you do, but what you don’t do that you should have done. This is true even if it’s not mentioned in the trust.
Trustees often inadvertently, well, step in it and create disasters. Usually, these disasters occur simply because a newbie trustee thinks everything will sort of happen automatically, as in: “I’ll just follow the terms of the trust!” Many uninformed and less-experienced advisors – CPAs, financial advisors, and even lawyers – are unaware of the many pitfalls. Unfortunately, it’s often too late when you discover the large number of things you have to do that aren’t written in the trust and on which the trust gives zero guidance—namely, rules and actions which are part of underlying trust and estate law of which you have no knowledge.
Smart trustees will engage a competent, savvy attorney early on because a trustee risks serious consequences simply by being uninformed. The old saying applies: you don’t know what you don’t know.
In this article, I assume that the person died with a trust, usually a “living trust” in place. If they died without a trust then you need to follow a whole different path, which you can read about in our article about probate in California.
Here at CunninghamLegal, we offer a complete service when it’s time for Trust Administration, from advice and counsel to fully taking the reins in handling a trust after the death of a loved one. You can contact us through the form on this page, or you can read about the basic steps for Trust Administration in California on your own or with the help of a firm like ours by clicking on this link.
For now, let’s pull back the curtain and take an insider’s view of 12 common traps (and one extra) that can put you, as a trustee, at risk. Knowing these risks can help you make a decision, stay in control, address problems quickly, and avoid unforeseen events. I’m confident you’ll find some valuable insights and solutions for managing your trustee situation.
Trap #1: Not Knowing You Are the Trustee, then Failing to Understand What that Means
Too often, family members or others don’t even know they’ve been appointed as successor trustee to a living trust! I’m serious. Parents may have failed to communicate this vital responsibility to the child they designated as trustee when they drew up their estate plan. When they die, no one fully reviews or understands the documents. Crucial months can be lost in which taxes pile up, bills are left unpaid, and tasks like determining property values at the time of death become more and more difficult—before anyone thoroughly reads the documents and takes on the role assigned to them as trustee.
Are you the right person to be trustee? Is your sibling? Should you hire a professional trustee? Your parents themselves may have given little thought to the whole question, and may have made the decision well before you were an adult. When a trust is drawn up without the benefit of expert advice, children are often appointed in the order of birth, in knee-jerk fashion, without regard to their background or ability. Parents with five kids may appoint them all as co-trustees – which means that all five kids serve as co-trustee at the same time- which often leads to deep trouble. The parents may even have forgotten to update the trust as later children were born or adult children drifted away.
Indeed, many parents don’t think their estate is large enough to merit carefully considering who the trustee should be or how to inform the trustee of their role. Often, they are wrong: an apparently small estate can turn out to be a large one, complicating the roles of trustees in a trust. Mom may only have a home and $10,000 in the bank, but here in California, that home can easily constitute a million-plus-dollar estate. More importantly, even truly small estates can be enough for siblings to fight over, leading to the more personal risks of being a trustee: emotional conflicts with family members.
Your job as trustee is to avoid those fights: and sometimes that means asking someone else to take over the obligation, perhaps a professional trustee—more on that below.
If you do take over the obligation (and you do not have to, it’s a free country!), you have a vital responsibility to fully understand what you must do. That means learning the whole path from beginning to end—and learning how to protect yourself along the way.
Too few trustees actually sit down and read all the estate documents thoroughly or fully investigate their responsibilities before they take them on. Far too few get even one consultation with a qualified attorney—significantly increasing trustee risks of legal action taken against them. Aside from the processes and laws of which you are unaware, trusts are often written in legalese. If you’re a layperson, you may not understand what these “terms of art” mean until you’ve made a mistake. For example, a word like “issue” has a very specific meaning: the surviving descendants of a deceased person. That’s the only meaning that applies. “Per stirpes” has a very specific meaning regarding what happens if a beneficiary has died.
Don’t guess about what the will, trust, and other documents mean and what you have to do. You could end up in court or in jail. Consult a professional to gain a better understanding of what is expected of you. That way, you can follow best practices and conduct yourself within the legal obligations required of you.
Trap #2: Trustees Failing to Take Action in a Timely Way
As you serve in the role of trustee, you have to take action and take it in a timely way. You can’t just sit back. Too often, there are things you just didn’t know you had to do: file for a new Tax Identification Number (TIN), locate a sibling, pay a tax, document a property value at the time of death, petition to include something in the trust that wasn’t properly retitled, or prudently relocate an asset. These are just a few situations you may deal with while serving your duties as trustee.
Indeed, inaction, not a bad action, is frequently the cause of problems, resulting in income tax or property tax penalties, and civil liability in the case of estate or “death taxes.”
A trustee can end up having to pay taxes out of their own personal funds if they fail to take action on behalf of the estate in a timely way. Of course, they can also face criminal liability for such crimes as taking money out of a trust to pay for their own kids’ college tuition. Yup, that’s stealing. But the action taken or not taken doesn’t need to be anywhere as egregious as stealing for you to get in trouble.
Why? Because trustees are always personally liable for both their actions and inactions.
Trap #3: Trustees Failing to Consider the Emotional Landscape
In every legal situation, one must deal with both laws and human beings – which means a lot of emotions. Every family is different, and you must step back to take a clear-headed assessment of the emotional landscape that’s now your job to manage. Your obligations as trustee are to the trust and to the trust’s beneficiaries (the people who inherit under the trust).
Who are they? Are they high-risk individuals? A charitable organization with their own lawyers? Sit down and do a little risk analysis on each one. Don’t just plow forward without knowing their circumstances.
Let’s say a beneficiary is a family member who has been in five lawsuits in their lifetime. That’s a pretty good signal they’re going to be in a lawsuit with you. Since you are also likely one of the beneficiaries, a suspicious sibling may immediately suspect you of having a conflict of interest.
Quite often, the child who acted as caretaker during the decline of the parents both becomes the trustee and ends up with more of the estate. Other siblings may say, “Mom would never have done this to me! As her caretaker, you unduly influenced her!”
Beneficiaries may even fight about things that happened (or they think happened) earlier in life, sometimes going all the way back to childhood. Old conflicts and wounds are often rehashed: “As the oldest, you always got the best of everything, and now you’re trying to take more than you deserve!” Never mind that you are all now in your sixties.
Neither argument above is likely to impress a judge unless the trustee has actually violated their duties by taking cash or other property from the estate or doing something equally improper. But you should head off such conflict before it escalates to a courtroom and destroys your family’s good relationships.
If you have a high-risk beneficiary or sibling rivalry to deal with, please immediately consider engaging a competent and experienced trust administration attorney to handle the estate, report fairly to everyone, keep the accounts, and reduce any fears about conflicts of interest. I say “immediately” because the first actions you take may be difficult to undo, and will themselves alter the emotional landscape.
In a high-risk situation, you need to do everything correctly from day one, and most likely you have never done this before.
Trap #4: Trustees Failing to Communicate with Beneficiaries
One way to minimize trustee risks and avoid conflict with the beneficiaries of a trust is to communicate with the beneficiaries. After a death, it’s crucial for all family members to understand what will happen next, and who is in charge as the successor trustee to the living trust. In other words, everyone must talk.
Indeed, good communication is not just an essential part of a trustee’s job, but a legal requirement. For starters, when someone dies and you become the trustee of the trust and/or executor of the will, you have to send a notice to the beneficiaries telling them they can get a copy of the trust if they wish (California Probate Code Section 16061.7).
Then keep in touch! I frequently get calls where a trustee says, “Mom died two years ago. I haven’t talked to my sister for a year and a half. She’s still living in mom’s house, which is supposed to be sold, and I’m supposed to get half the money.” At this point, not just family conflict, but major tax issues from capital gains to property reassessments are likely on the near horizon.
Don’t let problems like this slide. Stay in close communication with beneficiaries, and if there’s a possible difficulty, once again be sure to contact an attorney experienced in trust law.
Fail to communicate and you create not just problems but perceived problems as the other beneficiaries become impatient and concerned. Without clear and consistent communication early on, a trustee risks creating completely new (and totally unnecessary) problems in the future.
Don’t fall into this trap!
Trap #5: Trustees Ignoring a Beneficiary’s Rights
Let me repeat: trustees have obligations, while beneficiaries have rights. Trustees are frequently punished for breaching their duties. Beneficiaries are rarely if ever punished for exercising their rights. That’s why it’s absolutely crucial that you understand trustee responsibilities to beneficiaries.
Say that mom has two kids, a son who lives across the country and a daughter who has been caring for mom for the past ten years. Son never calls, he argues with mom and sister when they all get together once a year at Thanksgiving, and he doesn’t do anything to help out as mom declines. In short, he acts like a jerk.
Both son and daughter are beneficiaries of mom’s estate. This means that they each inherit from mom. Naturally, mom names daughter as mom’s successor trustee. When mom dies, daughter is overwhelmed and suffers tremendous grief. Daughter also feels relieved that mom has passed, because the daughter can have her life back now. Of course, this kind of relief is coupled with feelings of guilt.
Daughter neglects to take prompt action, as required under law and the terms of the trust. Not only is she suffering from grief and guilt, but she ignores her brother because she’s angry he did not help out. She stops returning his calls and doesn’t give him financial data. She doesn’t steal from the trust, but she stops caring about her brother’s inheritance, misses tax deadlines, and does not bother to help move half of the assets into his name in a timely fashion.
As a beneficiary, or the one who inherits, the brother doesn’t need to try to understand any of this or prove that he was a good son. He can go to court and claim his trustee sister mismanaged the trust and has breached her fiduciary duty. He can petition for her removal in Probate Court, where trust matters are filed and heard. Son may – or may not – succeed. In doing so, the brother isn’t considered to be challenging the trust. He’s well within his rights as a beneficiary.
While the sister’s reaction may have been understandable, a Probate Court may well deem it “unreasonable.”
Bottom line: If you’re a trustee, realize that your duty trumps everything else, even your grief, guilt, and anger.
Trap #6: Trustees “Borrowing” from the Trust, Assuming Something Is Just “Theirs,” or Otherwise Ignoring Fiduciary Duty
As I said, a fiduciary duty is the highest duty under the law. As trustee, you have to put the interest of the beneficiaries first—all the beneficiaries. If you are one of the beneficiaries, as you may well be, remember that just because you are the trustee, you don’t get any additional rights.
Ignoring or breaching fiduciary duty can take many different forms—from the unintentional to the criminal.
As a trustee, you aren’t allowed to borrow from the trust or use anything for your own personal benefit. If you find $100 in a drawer in your parents’ home, you can’t put that in your pocket, or leave it out of your reporting and accounting to beneficiaries (the people who inherit), even if you plan to pay it back later. If you and your father shared a love of bicycling, and he’s left his $5,000 Italian road bike in the garage, you can’t just take it home and assume he would have wanted you to have it without going through a full accounting process within the trust.
Let’s go further. Say you take $100K from the trust and return it within a month. This is a breach of fiduciary duty. This is also the crime of embezzlement, even if you repay it. What punishment can the borrower expect if beneficiaries find out and take you to court? It depends on how much your action has damaged the trust. Even if there’s no damage whatsoever, a judge would probably remove you as trustee and may impose any other penalties, even though the money was paid back.
If you took the money and never paid it back, not only can a judge remove you as trustee, but might require you to pay $200K—twice what you took—plus interest into the trust. There may well be additional damages if the money you took was to have been spent for the care of someone who’s disabled or incapacitated.
Sometimes the reasons for taking the money out of the trust are perfectly understandable. Perhaps you’re remodeling a house that’s an asset in the trust to get it ready for sale. A contractor shows up who demands cash. You as trustee go to the ATM and withdraw cash from the trust account. But the contractor never gives you an invoice and has since disappeared. It may have been unintentional or even well-intentioned, but you’ve still breached your fiduciary duty.
A five-minute phone call with your trust attorney could have advised against paying cash without adequate documentation.
Can You Take a Fee from a Trust to Act as Trustee?
All that said, a trusteeship can be nearly a full-time job, and California law does allow a trustee reasonable compensation for all of the work that is involved. Most trusts themselves specifically allow for compensation. You should, however, think twice before taking compensation if you are the only one inheriting under the trust—that’s because compensation is taxable as income, and inheritances generally are not. Importantly, all fees must be paid after the trustee correctly and reasonably does their work of administering the trust. If a trustee does no work, by law they must receive no pay. How much of a fee is reasonable? It depends on the language in the trust, on the state you live in, even on the county. Consult a qualified attorney.
Trap #7: Trustees Not Doing What’s “Reasonable” in the Eyes of the Law
Given all the above dangers, what standard will you be held to by law? A trustee is generally held to the standard of a “reasonable man”—a term which as of this writing has yet to be changed to “reasonable person.” This American legal concept applies to contracts and torts (from the French word for “wrong”) as well as trusts. As a trustee, you are legally expected to do what a “reasonable man” would do. In other words, you must exercise your fiduciary duty with “ordinary care and diligence.”
A living trust is set up to keep an estate out of probate court. That means that in effect, a trustee is an extension of the justice system; and a living trust is a replacement for the Probate Court. That’s why the trustee must do their job and take reasonable steps to “preserve” the estate during its administration.
What does “preserve” mean? It doesn’t mean you can just sit there and let the trust run itself. It means you have an obligation to make prudent investments that take into consideration economic conditions, tax consequences, return on assets, return of assets, diversification, estate laws, and more. Should a house be improved, sold, or rented? Should you put the money into bonds, stocks, or other investments? Should you let a sibling continue to live on a parent’s property?
Who ultimately decides what’s reasonable? If things go south and a beneficiary sues you, it will likely be a judge in a trust litigation lawsuit—only rarely do such matters go to a jury. Sometimes, investment or real estate experts are brought into a case to share their opinions on what a “reasonable man” would have done as trustee given what they started within the portfolio of assets. If the court decides you’re not just failing to take reasonable measures, but are actually criminally culpable, you could go to jail.
You should realize, by the way, that in general, judges have tremendous discretion in trust and probate matters. Many of their decisions cannot be appealed unless you can prove that the exercise of their discretion was improper—a very difficult thing to do.
To protect yourself, keep a good accounting of every penny in the trust, and consider creating an Investment Policy Statement (IPS) for the trust to guide your decisions and establish the reasonableness of your actions. If you get the advice of an investment professional, get it in writing.
Not sure if you have the expertise to consider all the factors and do the right thing? Don’t take on the full responsibility—find another trustee or bring in an expert in trust administration.
What If You as Trustee Don’t Think the Terms of the Trust are Appropriate?
What happens if something written in the trust made sense when it was written, but now either the law or circumstances have changed? There are many dangers of irrevocable trust arrangements, like the ability to exert control, what tax benefits are available as circumstances change, and how the trust management process ends up going.
However, all trusts eventually become irrevocable – even a revocable living trust. That’s part of intended design of an estate plan, where someone is directing what should happen to their stuff after they’re gone. When the person who created the trust becomes incapacitated or dies, the trust becomes “irrevocable” which means it cannot be easily changed. It requires a court to make a change.
For example, some older trusts can result in higher taxes. Wouldn’t it make sense to change the trust to avoid the higher taxes? With most trusts, the trustee must petition to Probate Court to make the changes. The Judge may agree or disagree. Who knows? And the legal fees start at $10,000 and go up from there.
Here’s where a person known as a trust protector can be helpful. Importantly, to have a trust protector, a trust has to name them in the original writing of the trust. A trust protector is an individual who is not the trustee but has the power to modify the terms of the trust. This person can instruct the trustee on certain actions or modify a potential “unreasonable” term of the trust without the courts. Often a trust will name an attorney or other professional as trust protector.
If there’s no trust protector, Probate Court is the only way to get a modification of the trust.
Trap #8: Using a Durable Power of Attorney During Someone’s Incapacity or Becoming Trustee While They Are Alive
If your parent or sibling becomes incapacitated, you may be asked to help and act under a “Durable Power of Attorney.” Maybe you’re just a long-time friend or neighbor who wants to help out by paying an incapacitated person’s bills for them.
A DPA authorizes you to act as an agent in financial matters if the “principal” (the person who created the DPA) becomes unable or unwilling to do things for themself. Someone with a durable power of attorney has all the fiduciary responsibilities discussed so far, even though the original principal is still alive.
A DPA has nothing to do with being an attorney, though an attorney can be hired to assist a person acting under a DPA. This person may be called an “agent” or “attorney in fact.”
Durable powers of attorney are frequently used for good. But they can also be dangerous legal instruments frequently dishonored in the real world, because they are easily abused, and are generally not overseen by any court. Most elder abuse cases involve durable powers of attorney. That’s because it’s all too easy for someone to download a one- or two-page power of attorney and get a principal to sign it when they don’t really know what they’re signing. The “agent” then has full access to the principal’s assets.
If you are the person given a durable power of attorney during someone’s incapacity, move with extreme caution, because violating a power of attorney can subject you to personal liability – including civil and criminal liability. This is an important part of potential trustee liability in general. If other family members are aware of your new role, they will rightly watch you with great attention.
Here’s one of the grave dangers you face if you accept an appointment as agent under a power of attorney: you may not know who your actions are affecting. If you are a trustee of a trust or the executor of a will, you know who all the beneficiaries and stakeholders are in the trust, and your role is clear. With a DPA, your duties are much less defined, you may not have access to the estate plan documents, if any—and as a result, you may inadvertently damage that estate in the eyes of others, even though your intentions are good.
Think twice before you accept a power of attorney. And if you accept that power, I strongly suggest you begin by tracking down everyone who is a beneficiary of that person’s estate and tell them what you’re doing, along with enlisting a professional trust administration attorney immediately, before you start playing with fire. You want to forestall any family member asserting, after someone dies, that you’ve been ripping off the principal (the person who created the DPA)—and the family—in some way through your actions or inactions.
The bottom line is that durable powers of attorney can be beneficial – and also risky – proceed with caution.
Recognize Dangers in Taking Over as Trustee While a Parent Is Living but Incapacitated and Unable to Serve as Trustee
You face a similar danger when you take over as trustee of your parents’ revocable, living trust while they are still alive, but incapacitated. You may think that the people who inherit when they pass away, the “remainder” or later beneficiaries of that trust (probably your siblings), would only have rights to sue you for mismanagement on actions you take after your parents (the “settlors” or original trustees die) – but not so. In the famous Giraldin case of 2012, the California Supreme Court ruled that remainder beneficiaries have the standing to sue even for stuff you did while the parent was still alive if you were officially their trustee at the time. Why? Because your actions may have damaged the assets your siblings were to eventually inherit! This has been added to the Probate Code – the California trust laws – in 2022 as Probate Code Section 15800.
Such court rulings and laws should raise red flags for anyone stepping in to manage a parent’s affairs. Yes, your parents need help. No, you don’t have to accept a legal role. But if you do, you bear the responsibility and should seek professional advice and assistance.
Trap #9: Unintentionally Becoming Untrustworthy in the Eyes of Beneficiaries
If you have vigilant beneficiaries, they will be carefully watching your every move. If you do a single, minor thing wrong—nothing egregious—their faith in you may suddenly evaporate, and a whole lifetime of good relationships may turn sour. Don’t mislead anyone about anything. Don’t do anything significant without considering communicating with everyone beforehand. Report to everyone regularly. And always keep a good accounting. Down to the penny.
Your interest in preserving good relations with the other beneficiaries may be the best single reason to engage a savvy trust and estate lawyer. Bringing in a professional also helps give you an emotional buffer from the process and its players.
If things really go bad, remember that courts want to honor the terms of a trust and protect trust assets. If convinced by unhappy beneficiaries, courts can remove trustees.
Trap #10: Relying on the No-Contest Clause in a Trust for Protection
Many trusts include a “no-contest” clause stating that anyone who challenges the validity of the trust in court will no longer be entitled to be a beneficiary and will lose any inheritance. Such clauses try to discourage nuisance lawsuits by beneficiaries who think they’ve been wronged.
No-contest clauses don’t do anything to protect the trustee. Truth is, for most cases in California, no-contest clauses do little to avoid lawsuits and leave a wide path for court filings. Indeed, the most common allegation is for a trustee’s breach of fiduciary duty, which does not constitute a challenge to the trust document itself. It seeks to enforce the living trust document.
If a lawsuit arises, a well-written trust will include language permitting the trustee to hire a lawyer to defend the trust, using money from the trust to pay for these services. This lets you use trust money to hire experts, CPAs, and investment advisors as part of the defense. Such a provision permits trustees to fulfill their fiduciary duties most effectively, should and when the need arises.
However, a beneficiary who feels the trustee isn’t fulfilling their fiduciary duty can file a suit to deny the trustee the use of trust funds to pay a lawyer. This can be like cutting off a car’s gasoline. A judge will generally deny this request unless the trustee really has acted egregiously. If, on the other hand, the court rules in the beneficiary’s favor, the trustee may feel helpless—and may well decide to resign the trusteeship.
Bottom line: if you have a troublesome beneficiary, don’t try to play a game you don’t fully understand. Get expert legal advice right away.
Trap #11: Relying on Advice from CPAs or Financial Advisors Instead of a Savvy Trust Lawyer or Hiring a Professional Trustee
It bears repeating: the best thing you, as a trustee, can do to protect yourself is to consult a savvy, experienced, and specialized trust lawyer—not a random attorney who says, “I do trust administration,” but doesn’t have in-depth experience.
Sometimes trustees will seek out the advice of a CPA or financial advisor instead of seeking out an experienced, savvy lawyer. Why? Often, the first person they talk to is a CPA or financial advisor. These professionals often want to help and avoid wasting money on unnecessary attorney fees. But these professionals are too often uninformed about trust law (because they aren’t lawyers!) and generally can’t see the full picture in the same way a savvy, expert lawyer can. A CPA may say, “You don’t need a lawyer. The trust says to sell the property and give the money to you and your three siblings. Fine. Just do what the trust says.”
This CPA is often wrong. There’s often plenty more you have to do. Again, take a look at our quick overview of trust issues and steps to complete when you become a trustee.
Sometimes a single meeting with an expert lawyer is all you need—if that meeting occurs on day one. They can tell you if you need more in-depth legal advice, which you probably won’t if the estate is a simple one, but you will be on the right track.
Importantly, when you talk with a lawyer, that’s deemed a privileged communication. There’s no such privilege with an accountant or financial advisor. This is especially important in case of later litigation, when that CPA or advisor could be subpoenaed, along with all your emails to them.
Consider a Corporate or Professional Trustee
One way to avoid the hassle, emotional roller coaster, and likely much of the personal liability is to have a “corporate trustee” or “private professional trustee” serve as trustee – instead of you serving as trustee. These professionals generally know enough to stay out of trouble on the basics of day-to-day trust administration, and I find they usually do a pretty good job of tending to the basics and covering all the bases. You may still need an attorney if things get complicated.
A Private Professional Trustee is a licensed, bonded individual who helps families by serving as the successor trustee instead of a son or daughter. Corporate trustees come in two varieties: trust companies and trust banks. A trust company typically will not manage the trust’s underlying assets. A trust bank will. That means trust banks charge higher fees than trust companies.
Consider whether hiring a corporate or private professional trustee would be helpful. But, if you do, remember you still have to review their work and keep them under regular supervision.
Trap #12: Not Planning for Court Delays
If all goes smoothly as a trustee and everything was properly put in the trust, you may not have to deal with courts at all. But if you do, realize that states, courts, and everything legal can be subject to serious and unexpected delays. That means you have to plan cash flow accordingly and manage the expectations of beneficiaries. You also have to realize that you are dealing with a system that has not yet fully embraced the 21st century and is still paper-centric. It’s improving, but slowly.
At the time of this writing, I can’t talk about anything involving courts without mentioning the changes brought about by COVID-19. We should anticipate periodic delays for years as COVID moves from a pandemic to an endemic phase.
I believe that as a result of COVID, we will see some long-term changes in processes. For example, courts are starting to realize that remote appearances aren’t so bad, especially for status conferences and other uncontested matters.
However, when it comes to lawsuits aimed at removing trustees or cutting off their cash, it’s still often critical for a trustee to show up in person—in the appropriate professional attire and with clean fingernails! If someone’s saying a lot of bad things about you, you need to show up to meet and talk to the judge who will decide the case. You can bet the other side will be there, reading the judge their grievances while wearing a nice suit.
At this moment, we’re seeing our filings delayed from four months to a year. (However, some counties have approved private judges to handle trust and other matters, which can really speed things up—a savvy attorney will know about these.)
Bottom line? Do not simply expect to get access to X paperwork on Y date after Z filing. Work with someone who knows the system. And learn patience.
Bonus Trap #13: Missing Court Dates and Blowing Off Mediation
One extra trap I have to bring up. If someone challenges your trusteeship, the trust, or accuses you of something and you end up in court, do not ever miss a court date. Ever. Period. And if the court orders mediation, follow through!
What is mediation? Let’s say someone files a lawsuit. Instead of going to trial, the parties get together to see if they can come to terms and settle the matter.
Courts in California frequently order mandatory mediation. If you are so ordered and don’t show up, you may still be bound by the terms of the settlement agreement that’s reached without your presence and input.
You may never have wanted to be trustee. You may be sick of the hassle. You may be especially angry about being dragged into court or a mediation—but by failing to show, the only person you hurt will be yourself.
Review of Key Takeaways: Avoiding Dangers for Trustees
- If you’re named successor trustee, before you accept the position, please make sure you understand what you’re getting into. You have the right to decline.
- Understand the basic steps in Trust Administration.
- Remember that you will be personally liable for screw-ups.
- If you accept, you need to identify the assets in the trust as soon as possible—as well as the assets outside the trust that should have been in it. Then you need to take custody of those assets.
- Decide if you need to hire outside experts to assist you in the job of trustee, including a CPA, a lawyer, a corporate trustee, and/or a financial advisor.
- Determine who the beneficiaries are. Who is making a claim for money or other property? Is that claim legitimate? Has a beneficiary died? Disappeared? What then? Ask an attorney.
- Always stay connected with beneficiaries—even if they’re unfriendly. Don’t ghost beneficiaries!
- Always act You will likely know what this means in any given situation, even if you can’t specify or define it beforehand. When in doubt, ask a trust attorney.
- Remember that inaction can be as bad as the wrong action.
- If you see conflict possibly coming, communicate with the beneficiaries or your lawyer, documenting what you have done to show you have acted reasonably.
- If a beneficiary lawyers up, the trustee should do so, too. But don’t wait: an initial consultation can prevent a lot of trouble down the road.
What Do We Do as Trust Attorneys and Trust Administrators?
One of the best resources available to you when dealing with complicated family and financial matters is a legal expert in estates and trusts. The lawyers and staff at CunninghamLegal help people plan for some of the most critical times in their lives; then we guide them when those times come.
Make an appointment to meet with CunninghamLegal for Estate Planning, Trust Administration, Corporate and Tax Planning, and much more. We have offices throughout California, and we offer in-person, phone, and Zoom appointments. Just call (866) 988-3956 or book an appointment online.
We look forward to working with you!
Best, Jim
James Cunningham Jr., Esq.
Founder, CunninghamLegal
We guide savvy, caring families in the protection and transfer of multi-generational wealth.
