Estate planning and elder law considerations linger in the background of our senior years. We plan for senior living, incapacity, and Medicaid. We create an estate plan to protect and preserve your wealth and provide for heirs after you are gone. Trusts are a smart and well-known estate planning tool that names or appoints a trustee to administer and distribute the assets according to the terms. However, how often do estate owners ask, “What if something goes wrong and the trustee breaches their duties?”
The case discussed in WealthCounsel’s article, “Trustee of Living Trust Who Was Beneficiary of Decedent’s Residuary Estate Had Duty to Collect and Protect Assets Not Yet Transferred to Trust,” reminds us to take steps in appointing the right trustee and to draft the trust’s terms carefully. This blog offers tips on avoiding trouble with your trustee.
The Trustee’s Duty: Safeguarding Assets in Transition
The case discussed in WealthCounsel’s article involved three beneficiaries, three co-trustees and assets meant for a restated revocable trust. One of the trustees did not collect and protect untransferred trust assets. The deceased’s three children and their mother sued that trustee for breaching fiduciary duty.
The Barash v. Lembo case underscores a critical aspect of trusteeship: the duty to protect and collect assets awaiting transfer into the trust designated for distribution from the trust. Despite the probate process, trustees must proactively preserve trust assets, even before their transfer.
In this case, the Connecticut Supreme Court emphasized that trustees are entrusted with a fiduciary duty from the moment of acceptance. This duty extends to diligently administering the trust in the beneficiaries’ best interests, including the prudent collection and protection of assets.
Fiduciary Duty Explained: Trustee Obligations Unveiled
Central to the trustee’s role is the obligation to uncover and address breaches of fiduciary duty by prior fiduciaries. Whether it’s compelling the transfer of assets or rectifying breaches, trustees must act in the trust’s best interests.
When a testamentary trust emerges as a will beneficiary, trustees are tasked with pursuing reasonable claims against the estate executor. This duty demands due diligence in securing all trust assets and ensuring comprehensive asset management.
Assessing Trustee Performance: Due Diligence in Focus
While a duty of due diligence binds trustees, evaluating their performance hinges on contextual considerations. All trustee’s actions are scrutinized within the framework of trust administration dynamics, emphasizing the need for meticulous asset management.
In Barash v. Lembo, the court’s ruling underscores the significance of trustees’ proactive engagement in protecting and collecting trust assets. Trustees must exercise diligence and vigilance, leveraging legal avenues to preserve beneficiaries’ interests.
Avoiding Trustee Trouble in Estate Planning Key Takeaways:
- Early Engagement Matters: Trustees are responsible for safeguarding assets from the moment of acceptance, underscoring the importance of early and proactive engagement.
- Fiduciary Diligence is Paramount: Trustees must diligently pursue claims and rectify breaches of fiduciary duty, ensuring that the trust’s best interests are upheld.
- Contextual Evaluation is Essential: Trustee performance is evaluated within the context of trust administration dynamics, emphasizing the need for nuanced decision-making.
Conclusion
In your pursuit of effective estate planning strategies, partner with a seasoned estate planning attorney who understands the intricacies of trust administration. Schedule a consultation today to embark on a journey towards safeguarding your financial legacy.
To learn more about estate planning in the East Valley, Gilbert, Mesa and Queen Creek, schedule your free consultation with Attorney Jake Carlson by using one of the links above.
Reference: WealthCounsel (Jan 19, 2024) “Trustee of Living Trust Who Was Beneficiary of Decedent’s Residuary Estate Had Duty to Collect and Protect Assets Not Yet Transferred to Trust.”