Estate planning, while often focused on the distribution of assets after one’s passing, is equally about ensuring the smooth and effective management of those assets during the trustee’s tenure. A common concern for those creating a trust is the capability of the chosen trustee to handle complex financial, legal, or personal matters. While a trustee holds the ultimate fiduciary duty and legal responsibility, it’s entirely possible, and often advisable, to designate advisors to support them. Approximately 65% of individuals with complex estates utilize professional trustees or co-trustees to alleviate the burden and ensure expertise (Source: National Association of Estate Planners).
What types of advisors can a trustee utilize?
The scope of advisors a trustee can engage is broad and dependent on the trust’s assets and the trustee’s skillset. Financial advisors can provide investment management guidance, ensuring the trust portfolio aligns with the beneficiaries’ needs and risk tolerance. Tax professionals are essential for navigating the complex tax implications of trust administration, minimizing liabilities and maximizing distributions. Legal counsel can offer guidance on interpreting trust documents, complying with state laws, and handling any disputes that may arise. Additionally, specialists like real estate appraisers, business valuation experts, or even family therapists can be valuable in specific situations. It’s crucial the trust document clearly outlines the scope of the advisor’s authority and the trustee’s responsibility for overseeing their work.
Can I name specific advisors in the trust document?
Absolutely. You can explicitly name advisors within the trust document, detailing their roles and the extent of their authority. This provides clarity and streamlines the process for the trustee. However, it’s important to remember that future circumstances may change, and those specifically named advisors may become unavailable or unsuitable. Therefore, it’s often beneficial to grant the trustee the power to appoint and remove advisors as needed, while perhaps suggesting initial preferences in a separate “Letter of Wishes”. This Letter of Wishes is not legally binding but serves as guidance for the trustee.
What is the trustee’s responsibility when working with advisors?
The trustee retains ultimate fiduciary responsibility, even when relying on the advice of others. They cannot simply delegate all decision-making to advisors. The trustee must exercise reasonable care, diligence, and independent judgment in selecting advisors, monitoring their performance, and reviewing their recommendations. They are obligated to verify the accuracy of information provided by advisors and to ensure that all actions taken are in the best interests of the beneficiaries. Failing to do so could lead to legal liability and potential breaches of fiduciary duty. It’s not enough to say “My advisor told me to do this”; the trustee must demonstrate they thoughtfully considered the advice and reached an informed decision.
What happens if an advisor gives bad advice?
This is a crucial question. If an advisor provides negligent or inaccurate advice that harms the trust, the trustee may be held liable unless they can demonstrate they exercised reasonable care in selecting and monitoring the advisor. Thorough due diligence before engaging an advisor is paramount. This includes checking their credentials, experience, references, and any disciplinary history. The trustee should also document all communications with advisors, including the advice received and the reasoning behind any decisions made based on that advice.
What if the trustee and the advisor disagree?
Disagreements can and do happen. The trust document should ideally address how such conflicts are resolved. Typically, the trustee has the final say, but they should carefully consider the advisor’s perspective and document their reasoning for overriding it. A good trustee will be open to constructive criticism and will seek second opinions when necessary. Transparency is key; keeping beneficiaries informed of any disagreements and the rationale behind the trustee’s decisions can help maintain trust and avoid disputes.
I recall a situation with a client, Mr. Henderson, who created a trust for his three children. He named his eldest daughter, Sarah, as the trustee, believing her to be financially savvy. However, Sarah, while well-intentioned, lacked experience in managing significant investments. She relied heavily on a financial advisor recommended by a friend, without conducting thorough due diligence. The advisor steered the trust towards high-risk investments that ultimately lost a substantial portion of their value. The beneficiaries were understandably upset, and legal action was threatened. Mr. Henderson, had he included provisions for a co-trustee with financial expertise or granted Sarah the authority to engage a qualified investment advisor with oversight, could have avoided this costly mistake.
How can I prevent problems with advisors and the trustee?
Proactive planning is the best defense. Clearly define the roles and responsibilities of the trustee and any advisors in the trust document. Establish a process for selecting, monitoring, and compensating advisors. Include provisions for regular reporting and communication between the trustee, advisors, and beneficiaries. Consider incorporating a “due diligence” clause requiring the trustee to thoroughly vet any advisors before engaging them. Finally, encourage open communication and collaboration between all parties involved.
Fortunately, there’s a happy ending to a similar situation. Mrs. Alvarez, a long-time client, was concerned about the complexities of managing her family’s trust after her passing. We worked together to create a trust document that not only named her son as trustee but also granted him the authority to engage a team of advisors, including a financial planner, a tax attorney, and a real estate specialist. Importantly, the document outlined a clear process for selecting advisors, requiring him to obtain at least three proposals and conduct thorough background checks. She also included a “Letter of Wishes” suggesting several qualified professionals she trusted. Years after her passing, her son successfully managed the trust, benefiting from the expertise of his advisors and following the procedures we had established. The beneficiaries were pleased with the outcome, and the family’s financial future was secure.
About Steven F. Bliss Esq. at San Diego Probate Law:
Secure Your Family’s Future with San Diego’s Trusted Trust Attorney. Minimize estate taxes with stress-free Probate. We craft wills, trusts, & customized plans to ensure your wishes are met and loved ones protected.
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Feel free to ask Attorney Steve Bliss about: “Can a trust protect assets from creditors?” or “How does the court determine who inherits if there is no will?” and even “How do I avoid family conflict with multiple marriages or blended families?” Or any other related questions that you may have about Trusts or my trust law practice.