Keeping the Peace in the Family: Being Named Trustee
Children who are named as a Trustee have a difficult task of distinguishing their familial responsibility with that of their fiduciary duty to the beneficiaries of the trust. While you may be trying to keep peace in the family you are also being tested under the guidelines of the California Probate Code. Every Trustee must produce an annual trust accounting upon demand by a beneficiary. There are formal and informal accountings that are acceptable under the probate code. Although this beneficiary is your sister, she still has rights that the Court will recognize under the California Probate Code. Your job is to distribute the assets of the Trust as quickly as possible to the beneficiaries. This can be done in kind or in cash. It is rare when all the beneficiaries are on the same page with how the assets should be handled, usually because each beneficiary has a different economic situation, needs, or personal goals. One beneficiary may need the cash while another is willing to hold on to a property if there is a down turn in the market and maximize the value of the assets. A trustee can authorize a buy-out of one beneficiary but that beneficiary must be offered a fair market value for his/her share. In short, there are myriad issues that have to balanced with statutory duties, a daunting task for anyone.
One thing that is important in administering a trust is that the trustee promotes transparency. Open up the books (which you should have been maintaining since day one), share the supporting documentation if necessary (e.g., bank statements, investment portfolio information dividend statements, etc…). Verify that all income and principal are properly accounted for in accordance with general accounting practice guidelines. Beneficiaries get nervous when they feel that the trustee is hiding something. You usually do not find this with a corporate trustee, but a family member who has been named trustee, especially another sibling, conjures up familial issues that have no relation to the trust administration. How many siblings have childhood grudges that couldn't be forgiven or forgotten? We've heard quiet a few. In situations like this, the administration of the trust can quickly spiral out of control.
In representing a Trustee, an attorney’s focus is to guide the trustee in the administration of the trust. The terms of the Trust set forth the guidelines for the distribution of the assets of the trust. The laws as set forth under California Probate Code set the guidelines as to a Trustee’s fiduciary responsibility in investing, distributing and accounting for the trust assets. A breach of a Trustee’s fiduciary responsibility in some cases can result in personal liability to the Trustee. Lawsuits in trust administration are costly and devour time and energy. They also reduce the size of the estate and the final distribution of the trust and serves to prolong the process and do further damage to the family integrity.
It’s our job to act regardless of the emotional involvement and simply do what is just and equitable. We don’t mind being the proverbial fall guy.