When estate plans involve trusts, lawyers advise careful consideration in naming the trustee. Families may think they are immune to conflict, but grappling with death and financial decision making can present difficult challenges for trustees to manage. Here are tips from experts.
Avoid Conflicts of Interest
A trustee must be prepared to manage the trust, in accordance with the intentions laid out in the trust agreement. Attorneys advise trustors and trustees to ensure the trust agreement, has significant detail and clarity to serve as an “instruction manual” for the trustee. No matter how the trust is arranged, the trustee has a fiduciary obligation to the beneficiaries—and must always exercise reasonable care and skill in managing the assets of the trust. As experts at the American Academy of Estate Planning Attorneys point out, this can require a great deal of skill:
The word “trustee” contains the word “trust” which provides the first clue about who will make a good trustee: someone the trustor trusts. An individual serving as trustee will have to make numerous decisions throughout the administration of the trust and these decisions require a certain degree of judgment, experience, impartiality, investment sophistication, record-keeping ability, and the ability to avoid conflicts of interest. The trustee will need to follow the letter and spirit of both the trust agreement and the governing state statutes. These decisions become more complex when tension exists between the beneficiaries. Many clients believe that naming siblings as co-trustees will force the siblings to work together. Often, it has the opposite effect and causes resentment and a situation in which quid pro quos are the norm.
Given the significant fiduciary duties undertaken by a trustee, the trust agreement may require a trustee bond— a specific type of fiduciary bond—which protects the interests of the trust and its beneficiaries in accordance with applicable state law. Essentially, trustee bonds guarantee the faithful performance of the trustee. As a leading national provider of many types of fiduciary bonds, Colonial Surety makes it easy and efficient to obtain a trustee bond. Just get a quote online, fill out the information, and enter your payment method. Print or e-file the bond from anywhere—even the law office.
Extra Careful Consideration
While thoughtful planning is always important related to the details of a trust, extra care is needed when trusts involve blended and extended families. For example, estate planning attorneys point out the care needed when a trust is created for a spouse during their lifetime with the remainder to children—who are not the biological children of the surviving spouse: “Giving the trustee power to make distributions of principal for the surviving spouse would reduce the amount passed to the children upon the death of the surviving spouse. The individual serving as trustee needs to understand these family dynamics and the potential for rifts to occur. Clients often believe their family to be immune to these behaviors, but a well-counseled and wise client understands that these problems occur frequently and plans for them.”
Trusts established for a loved one with special needs also require extra diligence in the selection of a trustee. It’s important to understand for example, that the trustee of a special needs trust must be able to work collaboratively with other professionals and people involved with the beneficiary. For example, if there is an appointed guardian or conservator, efforts to meet the needs of the beneficiary must be coordinated. The trustee must also keep the beneficiary and others, such as family, informed of trust activity. Accurate records and reports, including reports related to social security and medicaid benefits the beneficiary receives are also duties of the trustee.The National Law Review offers this guidance about trustees overseeing special needs trusts: “In selecting your trustee, the most important qualifications are loyalty and competency in administering the trust. The trustee is the quarterback of the plan who can hire financial advisors, attorneys, accountants, bookkeepers, social workers, and care managers. The trustee can delegate but must oversee everything.”
Learn more about the essential duties of trustees right here. Fiduciary bonds can play a helpful role in reassuring everyone involved that the trustee is committed to the best interests of beneficiaries. Whenever fiduciary bonds are needed or required, lawyers and their clients rely on Colonial Surety’s efficient online service to quickly obtain a quote, make the purchase and instantly print or e-file the bond. Colonial’s fiduciary bond portfolio includes: trustee, conservator, guardian, personal representative, administrator, estate, executor, probate, surrogate, and more. We have a full array of court bonds too. As a direct bond writer, licensed for business in every state, Colonial meets the specific requirements of obligees. Our pricing is exceptionally reasonable— there are never any “middle” fees.
In addition to providing bonds directly to the general public, Colonial offers The Partnership Account® for Attorneys . This free business service provides user-friendly client management dashboards, enabling attorneys to easily coordinate, view, complete and e-file the court and fiduciary bonds clients need. See for yourself today: The Partnership Account® for Attorneys.
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