Choosing the right trustee is essential in creating an effective trust-based estate plan.

Estate planning is a multifaceted process.

It involved finding an experienced estate planning attorney and evaluating financial assets and liabilities.

After getting a clear picture of both people and property, estate planning priorities and goals must be identified.

Only with this information can the legal documents for a comprehensive estate plan be drafted with a trust or a last will and testament as its foundation.

While trusts benefit from privacy and greater control, they must have a reliable and trustworthy trustee to be truly effective.

According to a recent WealthCounsel article titled "Trustee of Living Trust Who Was Beneficiary of Decedent's Residuary Estate Had Duty to Collect and Protect Assets Not Yet Transferred to Trust," trustees should be appointed after careful consideration.

Why?

Trustees have significant responsibilities and must be capable of the undertaking.

Trustees must be thorough in securing and managing trust assets for beneficiaries.

One Duty of the Trustee is to Safeguard Assets in Transition.

The WealthCounsel article underscores the fiduciary role of trustees.

It cites the Barash v. Lembo case to make its point.

What happened in this case?

A trust had been created with three beneficiaries and three co-trustees.

One of these trustees failed to collect and protect untransferred trust assets.

As a result, The children and wife of the deceased grantor sued the trustee for breaching fiduciary duty.

Yikes!

The Connecticut Supreme Court ruling held that a trustee's fiduciary duty begins when the role is accepted.

The administration of the trust in the best interest of the beneficiaries includes proactively collecting and protecting trust assets before their transfer despite the probate.

What Exactly is the Fiduciary Duty?

When a trustee assumes the role, this individual must also review actions taken by previous fiduciaries.

Trustees should initiate or finalize asset transfers and address any prior fiduciary breaches to best serve the interest of the trust and its beneficiaries.

If a testamentary trust is created and named as the beneficiary of a last will, the trustee must bring claims to the executor to secure and manage the trust assets.

How is the Performance of a Trustee Assessed?

Trustees must do their due diligence to perform their duties to benefit the trust and its beneficiaries.

Although performance evaluations are based on context, the trustees must be meticulous in managing assets.

The court ruling demonstrated the importance of proactively collecting and protecting trust assets.

What are the Key Takeaways for Avoiding Trustee Trouble in Estate Planning?

Trustees must take proactive steps to safeguard assets.

Because trustees are fiduciaries, they must take steps to work in the best interest of the trust and rectify any mistakes or oversights.

Evaluations of trustees should take into account the contexts and dynamics of the trust administration to allow for nuance in decision-making.

Whether you are selecting a trustee or serving in the role, it is helpful to understand the expectations within the context of estate planning.

This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.

Reference: WealthCounsel (Jan 19, 2024) "Trustee of Living Trust Who Was Beneficiary of Decedent's Residuary Estate Had Duty to Collect and Protect Assets Not Yet Transferred to Trust."