Trustee Fiduciary Responsibility
Responsibility, Impartiality & Good Faith
Your duties go as far as always acting with impartiality and in good faith.
What adjectives will your beneficiaries, your attorney, or a judge use to describe you and your tenure as trustee?
Here are some adjectives to describe a good and competent trustee:
Here are some adjectives to describe a bad trustee:
Untimely a trustee’s obligations, or duties, include the ongoing duty to act objectively, impartially, and in good faith. They are so important, and must be so clearly understood by a trustee, that they warrant discussion. They are important and cannot be overlooked, suspended or ignored. They must be at the forefront of your thoughts.
More recently, within the last 10 years, there’ve been a striking number of changes to trust law which were once thought unimaginable; including more clearly defined rights for beneficiaries, the use of third parties (trust protectors, investment agents, and designated recipients of information), expanded jurisdiction for courts, increased power and discretion for judges to intervene in the administration of trusts and also the opportunity to re-write the terms of an irrevocable trust through a court action called “information.”
Nevertheless, one central tenet has remained unchanged: you, as trustee, are a fiduciary who is charged with looking out for, protecting and acting solely in the best interests of the beneficiaries according to the governing law and the grantor’s intent as expressed in the language of the trust document.
In fact, if you are reading this far, chances are that you have already agreed to do this.
At all times, and without exception, a trustee must place the interests of the beneficiaries about everyone else’s – including your own. This duty is 24/7 – no breaks, and no holidays. And no excuses.
Think of a trustee as a trusted individual who is holding the hands of a person, a beneficiary, who is blindfolded and unable to see a clear path in front. It is your obligation to look out for, and guide, that beneficiary – to make sure that no harm comes to them.
Trustees get into trouble when they are biased, they improperly favor one beneficiary over another, make decisions for their own, personal reasons or beliefs, and not out of care or prudence. Don’t place your own self-interests, and personal feelings, above your obligation to serve the beneficiaries. If you exhibit disdain for, animosity towards, or lack of interest in, a beneficiary, then that is when your objectivity and good faith are gone. And at that time, it is time for you to go.
Treat Each Beneficiary Equitably: Even If The Trust Document Permits Un-Equal Distributions
The trust document may permit distributions to be made in different amounts for various beneficiaries. Different standards for distribution should not cause a trustee to believe that any particular beneficiary is less important than another. Each and every beneficiary needs to be treated fairly and certainly according to the standards and terms set out by the grantor in the trust document.
I need to reschedule our meeting because (problem).
I will need to postpone our meeting. (Explain problem.)
STEP TWO: GIVE AN ALTERNATIVE DATE/TIME:
Could we meet tomorrow at the same time?
A trust document may state that during the lives of 2 brothers “…the trustee shall distribute all of the income to Brother A and the trustee may distribute principal to or for Brother A’s health, education, maintenance and support, as the trustee determines is necessary or proper from time to time.”
That same trust document may also state that “…the trustee shall distribute principal for Brother B, for his health, education, maintenance, support, and comfort specifically including for the use of a new vehicle every three years, for the renting of a summer house for family vacations, for travel and entertainment and lifestyle expenses in a manner to which Brother B has become accustomed to as of the date of the execution of the trust document, and also for the purchase of a larger residence should Brother B get married, or have children.”
Issue: Do you treat the brothers equally?
Answer: No. The standards for distribution for Brother B are clearly more giving than those for Brother A. They are more specific, more detailed; suggesting that the grantor intended to, or anticipated that the trustee should, distribute more money to B than A. The document appears to acknowledge or enunciate the grantor’s intent or desire that trust funds be used not just for necessities, but also for Brother B’s lifestyle, or enjoyment—his “comfort.” The criteria, which the trustee shall use in determining whether to distribute, or not distribute, principal for Brother A and Brother B are different. But, at all times, the trustee must treat both brothers impartially, objectively, and fairly, and equitably—even though the dollar amount to each may be different, perhaps substantially different.