Questions to Ask Before Becoming a Trustee
At some point as family members, neighbors, or friends are planning their estates you might be asked whether you would be willing to serve as a Trustee. Especially if you have not had this experience in the past it would be reasonable to ask for further information. A source to which I belong, Elder Law Answers, www.elderlawanswers.com recently published a list of six questions to ask before accepting the honor and the responsibility. I would add a few more but the list is also excellent as it stands. Briefly stated the questions are as follows with my commentary.
- May you read the Trust? Not all trusts are the same. Some are much more complicated than others. Some are contained in Wills and some are standalone documents. The commentary notes you should read the trust (whether in a Will or otherwise separately on its own) and be certain you understand its provisions. If you have questions you should be able to refer them to the drafting attorney.
- What are the goals of the grantor? What does the grantor want to accomplish by establishing a trust? As the commentary notes many times the answers to that question are not contained in the document. It might be helpful to ask the Grantor (the person making the Trust) to state the objectives in writing. Reasons could include protection for a special needs child or just to establish a Will substitute. A third party such as yourself might be considered to act as an intermediary among family members or the trust might be established to protect against creditor or tax exposure either of the person making it or one or more beneficiaries. A support trust typically states it is for the beneficiary’s “health, maintenance and support.” There can be differences of opinion as to what is “support.” Do you have guidelines? In cases where a minor or disabled or elderly person is involved sometimes a document I have referenced in prior columns, a Letter of Intent, can be helpful.
- How much help would you receive? In some cases you would serve as a co-trustee with a bank or financial institution. In that case you might be brought in to make the type of personal decisions outside the realm of the professional investment manager and leave the tax, financial planning, returns and investment reviews to your co-trustee. If you are serving on your own, does the language of the Trust allow you to hire similar professionals – a financial advisor, accountant, attorney and pay them reasonable fees to assist in your work?
- How long will your responsibilities last? When there is a trust for minors there is a frequently stated provision in a Will allowing for periodic distributions then indicating final distributions at given ages such as 25, 30 and 35. If the minor is currently 10 years old is there provision in the document or otherwise for successors if you decide to resign?
- What is your liability? Generally trustees receive protection in the trust documents and under the law unless there is gross negligence or intentional violation of responsibilities. If you need auto accident charges due to negligence , you can get help from here! However, if you are a professional and violate your responsibilities the standard is typically higher and also you do have to use due care in any event. Responsibility should be discussed in advance.
- Will you be compensated? I have met many family members and friends who waive compensation initially but later realize this is a job that requires some time and commitment. If you are a son-in-law acting as a Trustee for your minor child under a grandparent’s Will it is understandable for you to waive compensation. If you are merely acting as a friend it certainly makes sense to receive reasonable compensation for your time and effort. To determine what is reasonable you can consult fee schedules in your area and also consider the extent of your involvement. If you are involved in reviews, distributions and accountings or if a minor or special needs child is involved and you include in your duties visiting the child and assuring she is receiving proper care, all of this can be taken into account. In that case you also need to know and discuss rules concerning what can and cannot be paid from the trust. In any event you are performing an important and needed service at what is often a critical time for the person who gave you the responsibility and for his or her beneficiaries.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.