Shouldn’t Trust administration be like a game of Simon says? That’s the old school yard game where one person gives an instruction, but you’re only supposed to follow the instruction if it is preceded by the phrase, “Simon says.” For example, Simon says, “Touch your nose.” Simon says, “Touch your toes.” Simon says, “Make proper Trust distributions when directed to do so by the Trust terms.”
A client of mine who was in a dispute with a Trustee pointed out that he received money from life insurance without any problem at all. A claim was made to the insurance company, a death certificate was submitted, and full payment arrived within a week or two. Shouldn’t the process of receiving assets from a Trust be similar?
He makes a good point. While there is a process that must be used to administer a Trust, the Trustee’s duties are simply to do as the Trust says. Especially with the voluminous amount of instructions left behind for the Trustee to follow. There are the Trust terms, which can be anywhere from 20 to 60 or so pages of material. Then there are the directives in the California Probate Code, which specifies everything from investing, allocating assets between income and principal, and a whole host of other duties and responsibilities of the Trustee. There couldn’t be much that is not written down for the Trustee to follow.
And yet, California Trust administrations drag on. Setting aside cases where the Trust terms are being contested (that will take a few years on average to resolve), the typical California revocable, living trust set up by any person prior to death names a successor Trustee. That successor is supposed to, “marshal” the Trust assets (which just means to gather them together—or take possession of the assets), pay the last debts, file tax returns and pay any taxes (this could take some time if an Estate Tax return is required), sell any Trust property that needs to be sold (such as real property and stocks), and then make the required distributions to the beneficiaries—sounds simple enough.
All too often Trustees, especially individual Trustees, wander off-course and believe that what the Trust says does not apply to them. It’s no longer a game of, “Simon says,” but one of “Trustee says.” Having a position of power, which the Trustee has, does not equate to having the ability to do whatever the Trustee wants. In fact, the Trustees’ powers are very limited by the Trust terms and the voluminous mandates of the California Probate Code.
So if you want to be a good Trustee, then play along as the Trust requires. It will keep the Trustee out of trouble and allow the beneficiaries to receive the benefits of the Trust that they are entitled to under the Trust terms.