Trustee’s Rules: It’s a Tough Job, and You Don’t Have to Do It

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Trustee's rules

Let’s say you’ve discovered that a recently deceased loved one named you successor trustee. We have a message for you: You are not a dictator, you are not royalty, you do not have a license to torment the relatives who are beneficiaries, and you don’t have to accept. You will be governed by some trustee’s rules, and they are important to understand and follow.

This comes to mind because we recently have sued trustees who failed to respect the basic requirements of the job. In at least one case, the trustee might face criminal liability. That’s right, it’s possible the trustee will spend time behind bars.

The truth is, it’s pretty rare for a trustee to abuse his or her position. But it does happen; trustees have power, and in families, the dynamic can quickly become toxic. Being an effective trustee means setting aside personal grudges and emotional baggage, having a clear understanding of the job, and making an effort to do it well.

All trustees are governed by a set of trustee’s rules. Particularly if you are a family member trustee and you choose to forge ahead, we have some tips for being effective:

Understand and Follow the Trustee’s Rules

Although trusts are private arrangements and there’s no court involvement unless something goes wrong, the Arizona Trust Code (“ATC”) provides lots of rules about trusts. The trust document itself is the main source of information regarding a trustee’s duties and responsibilities. But that’s not the end of it. Under the ATC, there are certain rules that are mandatory, and one of them is “the duty of a trustee to act in good faith and in accordance with the purposes of the trust.” (A.R.S.§ 14-10105) The ATC’s default rules also tell you what to do if the trust doesn’t specify. There are also court rulings that help serve as a guide. As a starting point: Read the trust, and if you don’t understand it completely, get help.

Know Your Role

As Trustee, you have the authority to manage the Trust assets, but you must always manage them for the benefit of the trust beneficiaries. You are a fiduciary, which means that you have a legal duty of fairness and impartiality to the beneficiaries and need to act in their best interests. The trust assets do not belong to you, you cannot use them for yourself or your own family members, or co-mingle them with your own assets. You are a caretaker of the property, keeping it safe while you fulfill the obligations of the decedent. You serve the beneficiaries, they are not beholden to you. Beneficiaries are generally entitled to reasonable information about the administration and to know how you handled every asset. It’s a good idea to promptly respond to questions and communicate to beneficiaries regularly.

Keep Accurate Records

You should keep records of all receipts and expenses of the trust. You may be required to provide an accounting to beneficiaries, a creditor, or the court if something goes wrong. Keeping accurate records from the outset (including receipts) makes this task much easier. An accounting should show the property you started out with (inventory), all property you received (receipts) and all disbursements (expenses paid, distributions). Each entry should list the date of the receipt or disbursement, the source if it’s a receipt or payee if it’s a disbursement, a description, and the amount.

Value Your Work

One of the trustees’ rules is in your favor: Trustees can be reimbursed from the trust for out-of-pocket expenses relating to the trust administration. A trustee also usually can get paid. Arizona law does not say how much a trustee should be paid other than the compensation must be “reasonable.”

You should disclose the fact that you are taking a fee and the method (hourly, percentage) to the beneficiaries. Again, records can become important. Keep every receipt for reimbursements and a log of time spent working on the trust administration. Note: Compensation is taxable income to you.

Do you have any alternatives? Yes!

Serving as trustee is a job, and not everyone wants it. If you are in a position to serve, be honest with yourself about your abilities, your time and energy, and your relationship with the beneficiaries before you accept the position. You may be grieving or busy or can’t stand dealing with your stepchildren who are the beneficiaries. You can decline. Even after you start, you may become overwhelmed and stressed. You can always resign. You also can hire a professional (like Fleming & Curti, PLC) at any time to guide you or, in some cases, to serve in your place.

What’s more, every person who has a trust should think carefully about their choice of trustee. What is the dynamic that is likely to play out once you are no longer in charge? Consider whether a neutral, third-party trustee might be a good fit. Engaging a professional will cost some fees, but family peace (and no jail time) may be worth it.

These tips are based on Arizona law. We are Arizona lawyers, and that’s what we know. Will your trust be governed by the trustee’s rules of Arizona? Perhaps not — but the general principles apply to nearly every trustee. Talk with an experienced attorney in your jurisdiction for more direction.

Robert B. Fleming

Attorney

Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman

Attorney

Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson

Attorney

Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour

Attorney

Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.