PetWill Radio

Wednesday, June 22, 2011

The Happy Trustee

It is not unusual to name a family member as the initial or successor Trustee of a revocable living trust, charitable trust, irrevocable life insurance trust or special needs trust. The challenge comes when the Trustee is required to carry out their duties. Do they know what to do? Do they know how to do it? What is their tolerance for risk? Their attention to detail? Their willingness to engage the services of a legal professional to ensure they are compliant with the law?

Many believe the role of Trustee is simple, that somehow all of the real work gets done by the document itself. There could be nothing further from the truth. Taking on the responsibility of Trustee is huge and it does have risks. We routinely discourage family member trustees when it appears no one will take the job seriously. I met with clients recently who have a special needs daughter. The daughter was left assets in a special needs trust by a deceased relative. However, when the distribution was made, it was made as an outright distribution and not in trust. The result - these assets are now considered an available resource to the disabled individual and will impact her ability to qualify for SSI or Medicaid.

Lots of war stories abound. How about the son named as successor Trustee when his dad died? Neither the son, nor the mother (nor the financial advisor who was providing the financial and legal guidance) understood the benefits of mom receiving the assets as part of a credit shelter trust. As a result, mom intimidated the son into making an outright distribution of the trust assets. The credit shelter estate tax exemption was lost along with other asset protection benefits afforded by the trust.

These are just the tip of the iceberg. These individuals didn't do anything wrong - they just didn't understand what they were supposed to do and what their obligation as Trustee imposed upon them. How about the Trustee who ends up utilizing all of the trust funds for his own benefit and not for the benefit of the beneficiary? I've seen more than my share of these egregious cases. The beneficiaries then end up spending thousands of dollars on litigation or worse, say nothing and accept the financial abuse imposed upon them for fear of causing family disharmony.

The selection of a Trustee is one of the most important estate planning decisions that can be made. If you have questions, feel free to attend one of our educational workshops at The Law Offices of Hoyt & Bryan, LLC, or call us at 407-977-8080 for a complimentary phone consultation.

The Happy Trustee

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