Being a Trustee can be a lot of work. But the work can be made ten times harder when there is conflict between the beneficiaries themselves, and a hundred times worse when there is conflict between you and one or more beneficiaries.
Know Your Mission
As a trustee you have four key missions: first, keep the trust assets safe, second, invest the trust assets, third, make distributions to the beneficiaries, and fourth, keep appropriate financial and tax records. You must carry out these missions with good faith, care and diligence, meeting the highest levels of fiduciary duty. Otherwise, you could find yourself in hot water.
There are two types of trustee roles: short term, and long term. Short term trustees are focused on gathering the estate and dividing it per the trust’s instructions to the beneficiaries. Long term trustees are focused on managing the trust assets for the benefit of the beneficiaries. Whichever role you have, following these tips will help you avoid conflict among the beneficiaries, and between yourself and your beneficiaries.
Know your Duties
As a trustee, you are described as a “fiduciary” in legal terminology. A fiduciary owes the beneficiaries certain duties of loyalty, impartiality, and care.
Whenever your financial interests and trust money cross paths, watch out – your loyalty will be challenged. Better to keep them entirely separate, even if you think the investment is sound.
Beneficiaries may not all receive the same percentage of the trust assets, but they are all equal in this sense – they are beneficiaries. If you treat them differently, favoring one, or creating problem for another, your violating the duty to be impartial.
Lack of communication breeds distrust. Good communication will let everyone know what is happening and why. Your first job will be creating an inventory. From there, you’ll need to account for all changes – any expenses, any income, while you are in charge. If record keeping is not your strong suit, talk to a bookkeeper or accountant about a simple method to help you keep track of everything. Finally, you’ll need to explain (and carry out) the distribution of the estate.
Carrying out your duties quickly and efficiently not only saves you time, but keeps everyone happy. At the same time, you don’t want to discover months after the money has all been disbursed that there is a tax bill due.
If your role as trustee is long term management of trust assets, you should develop a trust distribution plan. The plan should consider things like preserving the trust principal, providing for the beneficiaries needs, and placing reasonable expectations.
Know When To Call For Help
As trustee, you may feel like you need to be an attorney, an accountant, an investment advisor, and a psychologist all in one. The good news is that you can bring in the experts for areas which aren’t your strong suits.
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