Relatively little has been written about being a Trustee. Sure, you can find plenty of information online or speak directly with an estate planning attorney about how to choose a suitable Trustee, the Trustee’s role, expectations they must adhere to, what to do if you need to find a replacement, and so on. That said, you would be hard-pressed as a newly minted Trustee to find clear instructions on how to carry out your duties—especially when it comes to avoiding common mistakes, managing family dynamics, or ensuring you don’t accidentally expose yourself to potential liability.

Simply put, being a Trustee is confusing. Since estate planning guidance is our focus, our goal with this upcoming series of articles is to help Trustees understand their role, identify what needs to be done, and guide them through the nuances of the job.

Since we are on the topic of potential liability, let’s start there.

Trustee Reality Check: You’re a Potential Legal Target

There are two things you must be prepared for when acting as a Trustee. The first is that you must be prepared to carefully document all transactions in which you are involved—which, honestly, will be mostly all of them. The second is that you must prepare to win potential lawsuits against you for your breach of fiduciary duty.

Wait? Lawsuits? Yes, you are a potential legal target as a Trustee. 

Granted, the risk of a lawsuit is typically low in these circumstances. That said, you cannot ignore the possibility. After all, you are essentially in control of someone else’s assets or inheritance and could be the object of any anger they feel along the way. Especially since anger is one of the stages of grieving. 

The good news is that potential liability is rare. Also, you can control what happens next by following a few simple rules.

1. Provide beneficiaries with adequate information and keep them informed and involved. Nobody likes to be kept out of the loop, intentionally or unintentionally. So, err on the side of over-communication. Copy beneficiaries on all correspondence; have them attend meetings and solicit their opinions on various matters.
2. Be friendly and cooperative. People rarely want to sue someone who is nice and communicates well. This is true no matter how many mistakes they make. It is much more difficult to sue someone with whom you have a good relationship.  

What Happens If I’m Sued Anyway?

Great question! If a lawsuit does arise and escalates to a drawn-out court battle, a carefully documented file will look a lot better when presented to a jury than a poorly documented one. Also, a Trustee who seeks advice from experts is likely to appear more credible than one who does not seek such advice. In other words, you must prepare for a lawsuit from Day 1—even if it never happens or cooler heads prevail. It has been said that if one wants peace, one should prepare for war.  

A Trustee who is fully prepared for war, but not deliberately doing anything to start a war, is far more likely to win.

Here are a few additional tips to consider:

1. Your job is to carry out the intent of the trust. Your first line of defense with any potential liability as a Trustee is that you did carry out the intent of the trust. In carrying out the intent of the trust, you must first look to the words of the document itself.  You cannot try to say, “I think the Trustor intended this or that,” and act accordingly. You must look at what was actually said and follow that to the letter. Regrettably, words are tools and are often imperfect for expressing intent.
2. It may be tempting to fix a problem or correct a poorly worded document. That is not your job and could land you in legal hot water. Only a court of proper jurisdiction or a Trust Protector can change a trust document, and even a court’s authority is limited. We cannot stress this enough: Do not change what is written. However poor it may be, it is the best expression of the Trustor’s intent. Furthermore, that expressed intent is your defense. You may not add to or subtract from those words.
3. Feel free to use a dictionary to help interpret language. However, keep in mind that a document written many years ago may use words that have a different connotation today. If the document is ambiguous, meaning that you cannot determine its meaning from the words used because they can mean more than one thing, the drafting attorney is probably your best source of help. That attorney may have notes in the file that provide a clearer meaning or clearer intent.
4. Document how you carried out the trust terms and create a log of every action you take. The better you do that job, the more difficult it will be for the beneficiary (or anyone else) to show that you did something wrong.
5. Once you have accepted the job as Trustee, you will be responsible for a final accounting if, for some reason, you are no longer able or willing to serve as Trustee. Furthermore, you cannot avoid a potential lawsuit simply by resigning. If you are unwilling to continue serving, you may resign; however, you cannot quit until a replacement Trustee is found.

Call Leigh Hilton PLLC Today!!

Having an experienced attorney in your corner will help you and your family navigate the often overwhelming waters of protecting everything you own and everyone you love. That is our job, and we think we do it better than anyone else. Call Leigh Hilton PLLC so that we can help ensure you and your family are taken care of in the best way possible. 

Leigh Hilton PLLC wants to be your first call every time for any estate planning need. We look forward to serving you.