By Jane McNamara, Elder Law Attorney 

I met a new client whose mother had recently passed away.  Mom had a revocable living trust which was prepared years after her husband had died.  Our meeting focused on settling mom’s affairs and distributing her assets to her five adult children.  After reviewing the trust document, the real estate deeds, bank accounts, life insurance policies, and asset statements, our paralegal asked the new client the age old question: “How do the five siblings get along?”  The response was one we hear frequently: “Wonderfully, there won’t be any family disagreements.  My siblings are anxious to receive their inheritance.  Can we do that today?”  I nudged my colleague under the table.  She shot me a knowing look.

The client was surprised to learn that there are important tasks which must be completed by the trustee before the siblings can receive their inheritance.  He listened intently as we discussed the legal requirements of being the trustee of his mother’s trust, all unfamiliar to his ears.  We discussed activities such as properly taking title to assets and collecting the trust assets, notification to the beneficiaries, the payment of debts, providing trustee accountings of the trust financial activities, fiduciary tax returns, and valuation of assets for possible estate tax returns.  We also discussed the possibility of personal liability if he fails to fulfill his legal duties as trustee.

He was appreciative of our advice, and happy to have direction.  Although he was not too thrilled about his new legal responsibilities, he was pleased that his mother named him as trustee, rather than naming his older brother.  He realized his older brother simply could not have properly handled the responsibilities.  His mother obviously carefully considered her choice of trustee, and selected who she believed to have the skills necessary to administer her estate.  She apparently considered the underlying relationships among the siblings and the unique family dynamics.  She also ensured her assets were properly titled in the trust and all beneficiaries designated where necessary.  Her documents were current, and included an accurate schedule of trust assets so that her trustee could efficiently identify and collect those assets.  No surprises, and no need for probate.  She did a good job.  Yet, her son, the successor trustee, had no idea until our meeting of how to finalize her affairs. 

I am concerned about how many well-intentioned people select their successor trustee based only upon birth order.  I am also concerned about people carrying out the duties of trustee, without the knowledge or skills, and possibly incurring personal liability and the wrath of the IRS.  Revocable Living Trusts are powerful tools when used correctly.  They can be disastrous when ill prepared or administered incorrectly.  People should carefully consider the important selection of their successor trustee, and discuss the duties and responsibilities with those trusted individuals before they must assume that very important role.