Setting Up a Trust and Selecting a Trustee

November 9, 2023
Cheerful senior couple sit with adult son drinking tea.

Trusts are not just for the wealthy. They serve many purposes and solve specific problems that may have little to do with wealth, focusing more on family dynamics.

As you think about your estate plan and passing your assets on to your loved ones, consider the following questions:

  • Would you prefer to keep your affairs private and help your loved ones avoid probate court?
  • Have you remarried and now have a blended family?
  • Would you want to leave any money to your favorite charities?
  • If you own a small business, do you worry about liability?
  • Do you have a child with special needs?
  • Do you have an elderly parent who might need government benefits?

In essence, a trust is a legal arrangement that can own assets. It not only outlines instructions for who will handle your final affairs, but also who receives your assets after you die.

A well-designed trust holds your most significant assets, protects them, and eventually transfers them to your loved ones. There are numerous types of trusts to fit various situations. You create the trust and fund it.

You may opt to act as the trustee during your lifetime. Or you can choose a third party, or trustee, to manage and administer your funds before and after death. The individual you name as a trustee can find professionals to help them with the tasks involved. In fact, one option is to hire an experienced corporate trustee to manage your trust.

Trustees must provide beneficiaries with regular accountings of investment activity until you pass and your estate is settled. Choosing the right one is critical.

Selecting a Trustee

Trustees assume a fiduciary role and must carry out the terms of the trust in the best interest of your beneficiaries. They need to have some experience with estate administration and finances or hire someone to advise them. An inexperienced trustee may become overworked and overwhelmed. The wrong trustee can be intentionally uncooperative, abusive, or dishonest, which could lead to litigation.

If a trustee is not living up to their duties, your beneficiaries can request a copy of the trust documents as well as records of estate transactions. Beneficiaries have the right to know where trust funds have been placed, how much income the funds have earned, and how much the trustee has spent on expenses and commissions.

If your trustee has not provided you with an accounting, ask politely in writing and give them a reasonable timeframe to comply. Having an estate planning attorney send a letter may do the job. There may be a simple matter of miscommunication between the trustee and heirs.

Your attorney can identify the problem and work things out amicably. If they find this is not possible, they may advise you to go to court.

Trust Litigation in Probate Court

Some problems may prove more difficult to resolve. They may require litigation with an estate planning attorney who is familiar with current trust administration and litigation laws in your state. They can determine if the trustee has mishandled the estate or breached their duties.

Note that you should contact an attorney quickly because there often are time limits and requirements when filing a case. You could face a penalty for not acting promptly.

A trustee is responsible for communicating honestly and openly with beneficiaries. They must gather and invest property of the estate, and account for property that passes through the trust.

If your trustee has invested funds recklessly, lost money, or won’t communicate with you, those are civil disputes you will likely need to resolve in probate court. The probate judge can force uncooperative trustees to act. Or, if necessary, they may seek to remove the trustee altogether if they are unfit or the situation warrants it.

How to Avoid Complications in the First Place

An experienced estate planning attorney can design a trust for you that clearly states the terms the trustee must follow. They will also advise you when selecting your trustee, ensuring you have considered the best options. In fact, attorneys can also serve as skilled trustees, as they already understand what is required in a complex fiduciary role.

If you are a trustee or beneficiary and find yourself in a dispute, seek out an estate planning attorney specializing in trust administration and litigation. They can play a critical role, help you understand your rights and providing solutions. In addition, they can gather required information, explain how your state laws work, and support you through negotiation and court processes when necessary. To learn more about trusts, take a moment to read the following related articles: