Trust and Estate – Awesome Trustee

How to be an Awesome Trustee | Palomar Law Group

So, you want to be a trustee?  That’s great, because it’s a very important job.  Be careful what you wish for, however.  The fact is that being a trustee is hard work, often for very little (or no) compensation.  For those who believe that hard work is its own reward, a trustee job suits them well.  For others who want something tangible in return for their work, another kind of work will probably suit them better. At Palomar Law Group, our knowledgeable Trust and Estate Attorneys provide sound counsel to trustees. Call (760) 747-2202 to schedule a complimentary consultation.

Topics for Trustees to Consider

Here are some topics for thought:

Understand the position. 

The trustee’s job is to serve the beneficiaries.  The trustee must work diligently to serve others’ interests, and must place their own interests in a subordinate position to the interests of all the beneficiaries.

Remember who is the Boss.

We all know the slogan “The Customer is Always Right.”  The office of trustee was created to serve the beneficiaries.  Also remember that is the settlor who created the trust and all of the rules in it, and the trustee cannot change these rules.  Nor can the trustee ignore the rules.  The trustee is strictly bound to follow the rules set forth in the trust document.  Further, the trustee is strictly bound by many rules outside of the trust document, including the prudent investor rule and rules against self-dealing.

Be prepared to be walked on. Because of our suspicious nature, the trustee is often suspected of wrongdoing merely because they have access to the assets of the estate.  So, even a trustee who is doing a good job can be subject to unjust and unfair criticism, and other disrespectful treatment.

Don’t expect any thank you notes. When the trustee performs their job well, others often don’t seem to notice.  This is the paradox of a job well-done as a trustee.  Not only does a good job usually go unnoticed, it is also usually uncompensated.

A higher calling. 

Being a trustee is a higher calling, far outside of normal human experience.  It is therefore a potentially dangerous trap for unwary amateur trustees.

Getting prepared.  A wise trustee takes stock of the assets of the trust and seeks professional advice before embarking on the work. Consultation and planning are very important.

Remember the parable of the talents. 

Three servants are entrusted with money.  Two of them work hard to use and increase the money and are rewarded for their work with praise and greater responsibility.  A third servant is suspicious and lazy and buries the money, thus gaining nothing.  When the truth is discovered, the servant is fired and banished for negligence and insubordination.  The moral of the parable is that loyal diligence is rewarded, and laziness is punished.  The Courts are the watchdogs of trustee performance.  Judges do not hesitate to order repayment of losses caused by mismanagement.

Lessons from the trenches. 

I have personally been involved in disputes in which trustees have committed serious blunders. I have seen trustees who have actively engaged in changing estate planning documents while the settlor was alive; trustees who have paid themselves exorbitant management fees; and trustees who have loaned themselves money from the trust, engaged in risky investments, and have failed to prudently invest assets. I have even seen trustees accused of forgery and theft.

The lessons are simple but not easy: (1) a trustee must strive to live up to the Scout Law,* and (2) should avoid even the appearance of self-dealing or conflicts of interest.

Hiring a Professional? 

Some people aren’t sure if they (or their chosen trustee) can do the hard work of a trustee.  In that case, they should seriously consider finding another person such as a professional trustee.  It’s true that a professional trustee costs more, but the value provided is easily justified.

The Bottom Line. 

If you want to be a trustee, make sure your eyes are wide open before you accept the job.  When you accept and welcome the hard reality of the job, you are ready to begin planning for the job.  Only then are you on your way to being an awesome trustee.

* The Scout Law reads: “A scout is trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean and reverent.”

For skilled guidance in trust and estate matters, contact Palomar Law Group by calling (760) 747-2202.