We spend a good deal of time discussing the shortcomings of individual Trustees. But there are a few tips that beneficiaries should know to try to make a Trust administration go a little smoother.
1. Patience is a Virtue. It takes time to properly administer a Trust estate. Assets have to be gathered together, real property has to be refurbished and sold, personal property has to be collected, jewelry has to be appraised, the list goes on and on. Trustee’s are not allowed to take too much time to administer the Trust, but it can’t be done overnight either. So how much time does a Trustee have to administer a Trust? The legal standard is a “reasonable” amount of time. But there is no definite definition of “reasonable,” it varies from case to case.
For example, a Trust with a single house in it, that needs to be fixed up a little (but not completely refurbished) and then sold, should have the house listed for sale within 3 or 4 months of the Settlor’s date of death. The entire Trust administration should be concluded within a year or less.
If there are other issues that need to be resolved, such as multiple real properties, difficult stocks to sell, or anything else out of the ordinary, then a year to 18 months may be more reasonable.
If it is a complex Trust estate that is subject to Federal Estate Taxes, with multiple properties and complicated partnership, then 18 months to 2 years may be more like it.
The bottom line is to give the Trustee some room to act. That doesn’t mean you have to wait forever, but a little patience can go a long way.
2. Information Overload. Every beneficiary has the right to information regarding the assets of the Trust. Information requests must be reasonable, however. Beneficiaries are not entitled to see every bank statement every month. Some Trustees do share that information, and it’s never a bad idea to do so, but the law does not require it. What the law does require is sharing information when it is reasonably asked for and providing regular (as in annual) accountings of the Trust activity.
3. Back-seat Driver/Arm-Chair Quarterback. Beneficiaries are not in control of the Trust. It may seem odd that you have no say over money and assets that belong to you, but that’s how Trusts work.
The Trustee of a Trust is the legal owner of the Trust property; whereas the beneficiaries are the beneficial owners. That means the Trustee, and only the Trustee, gets to call the shots on how property is held, invested, etc. Of course, the Trustee can’t just do whatever he or she wants. A Trustee must follow the Trust document and must adhere to Trust law under the California Probate Code. Between the Trust and Trust law, there is a mountain of duties and obligations the Trustee must obey—but that’s the Trustee’s job to figure out, not the beneficiaries.
4. Open Lines of Communication. Being a Trustee can be a thankless job because Trustee’s have all of the duties. While Trustees have a duty to communicate with their beneficiaries, beneficiaries should also try to communicate clearly with the Trustee. That means being clear about what you want, responding to requests for information from the Trustee, and generally being cooperative regarding Trust business—to the extent it is reasonable to do so. I’m not saying beneficiaries have to go along with whatever the Trustee is doing, but clearly communicating your goals and desires is important.
5. Call the Professionals. Trustees have the right to hire professionals to advise them. This includes lawyers, accountants, and financial planners—all acceptable advisors that a Trustee can hire and pay for out of the Trust estate. Of course, the Trustee should also follow the professionals’ advice, which is where many Trustees go wrong.
6. Who’s Your Lawyer? The trustee’s lawyer is NOT your lawyer. If the Trustee hires a lawyer, the lawyer represents the Trustee, in his or her capacity as Trustee. The lawyer does NOT represent the Trust or any of the Trust beneficiaries. This is a common misconception. Many beneficiaries believe that if a lawyer represents a “Trust” then that lawyer must represent the beneficiaries too. Not true. Lawyers don’t represent Trusts, they represent Trustees. That may not sound like much of a difference, but legally it’s a huge difference. Trusts are NOT like corporations, they cannot act independently of their Trustee. Trust’s act through Trustees, and Trustees can hire lawyers and other professionals to represent them—and only them. Beneficiaries should keep this in mind whenever they talk to the Trustee or the Trustee’s lawyer. If a beneficiary wants some independent legal advice, he needs to hire his own lawyer for that.
7. The Written Word. Document everything you do and say during the course of a Trust administration. It never hurts to keep notes of what has occurred and what action you have taken in response. While you hope that these cases don’t wind up in Court, Court action is always possible. And if that occurs, better to be ready for it by having a clear record of what occurred and when.
Judges don’t like difficult beneficiaries, and it could make the Trustee look sympathetic if he had to deal with difficult beneficiaries. Better to hold up your end of the Trust, act reasonably, and let the Trustee’s actions speak for itself—good or bad. It never hurts to be a better beneficiary.