When the time comes for a living trust to be administered, it’s pretty common for people to find themselves in dual roles, serving as successor trustee but also named as a beneficiary of the trust. Whether you’re a parent administering a trust for yourself and your children, or a child managing a trust for yourself and your siblings, it’s important to take your role as trustee seriously.
What do I mean by this? Often, when trusts are a family affair, the trustee is tempted to relax a little too much. In reality, though, you’re in a particularly difficult position because, although you will ultimately receive assets from the trust, you have a duty as trustee to act on behalf of all the beneficiaries (instead of acting in your own interests). If you find yourself in this dual role, there are a few common pitfalls you’ll want to avoid:
- Poor Recordkeeping: It’s critical that you document your actions on behalf of the trust, and that your records as trustee are accurate and up-to-date.
- Lack of Communication: The other beneficiaries may very well trust you to handle matters on their behalf, so it can be easy to proceed with your duties as trustee without keeping everyone in the loop. However, as trustee, you have certain duties when it comes to keeping all the beneficiaries informed. Your attorney can offer guidance as to what needs to be disclosed and when. Keeping the other beneficiaries informed can reduce family disagreements and ensure everyone involved that your actions are above-board.
- Misuse of Trust Assets: It can be tempting to view trust assets as “belonging to the family” or even belonging to you; however, as long as the property belongs to the trust, you’re responsible for managing it on behalf of all the beneficiaries. So, make sure you don’t fall into the trap of using trust property for yourself. Also, if you are entitled to compensation as trustee, you’d be wise to document your services on behalf of the trust as well as the exact compensation you’ve received.