Many individuals believe that their children and spouses are the perfect choices to act as successor Trustees after the owner’s death or incapacity. However, family dynamics, such as second marriages or issues between siblings or their spouses, frequently make this choice costly – both financially and in terms of personal relationships.
Once Trusts become irrevocable (typically after death) trustees are presented with significantly different rules and responsibilities than the owner faces during his or her lifetime. Failure of a Trustee to follow these rules may result in personal liability to the Trustee in addition to resentments and suspicions by other family members who are not “favored”.
The case of DeMello v. Buckman (Florida – 2005) presents a vivid example of this issue. Andrea Buckman was named successor Trustee by her parents. Her sister, Joyce Buckman, complained that Andrea: did not provide accountings (as required by Florida law); did not make timely distribution; improperly valued assets and then breached her fiduciary duty by taking these “undervalued assets” as her share; made improper payments from the trust; and did not distribute and close the trust within a reasonable time.
The Trial Court decided that Joyce did in fact breach her duties and awarded Andrea over $76,000 in damages (and just consider what the attorney fees amounted to!). The case was appealed and many of the damages were reversed on a technicality. However, the relatively uncomplicated estate turned complicated when Joyce, as Trustee, failed to follow the rules required of a fiduciary and failed to keep her sister properly informed.
The Trust became irrevocable when the second parent died in 1999. The Appeal was decided in late 2005. A professional fiduciary would have typically administered and distributed a terminating trust (without estate tax consequences) within one year – at significantly less expense than the sisters experienced through their legal fees – and without the personal conflicts. Additionally, we may speculate that Joyce did not work closely with her parent’s estate planning attorney to guide and assist her in meeting her responsibilities under the Trust agreement.
If you would like to discuss the various duties and complexities confronting a successor Trustee after the Trust owner’s death, please contact our office to arrange a meeting with one of our estate planning attorneys. We will be happy to provide you with options and alternatives to ease the transition to the next generation. We will also be more than happy to meet with your chosen successor Trustee to discuss with them those duties and to outline the role of the Trustee and the attorney in the estate settlement process.