Brief Overview of a Trustee’s Duties
In this section from his book, “Pankauski’s Trustee’s Guide”, John Pankauski explains the roles and responsibilities of a trustee. Click here to request a free copy of the book
Why in the world would you want to be a trustee? Why…
Would you want to deal with beneficiaries’ demands for money, their insecurities and feelings of inadequacy? And their demons?
Would you want to (indeed volunteer or agree) to account every year, review investment statements, deal with beneficiaries who may want to sue you, invest others’ funds for income and yield and also capital appreciation, and, perhaps worst of all, deal with attorneys?
Work in an environment where your every act is questioned and subject to Monday morning quarterbacking?
If you’re holding a lot of cash and the markets go up, beneficiaries complain that you failed to capture those gains. If you’re fully invested in the market and the market takes a dip, the beneficiaries complain that you are overexposed. If one of six beneficiaries requests funds for a minor child’s education, the other five beneficiaries will want a similar distribution—regardless of need. A beneficiary who is monetarily successful or rich in her own right will demand that you not consider other financial resources when distributing trust funds to her. The beneficiary who is a schoolteacher or social worker will wonder why you are distributing trust funds to a beneficiary who is a successful doctor or lawyer –
Don’t You Have Better Things To Do With Your Time?
Welcome to the world of being a trustee. Where your every act is questioned, and every beneficiary believes that they can do a better job than you can.
This chapter will ask you to think hard about why you want to serve as trustee, and provide some background or window dressing to the role. It will discuss recurring thoughts of your family members and how they may react to one’s wealth and inheritances.
Being a trustee is a great responsibility. Perfection is not required, but incompetence shall not be tolerated. You must know what you are responsible for, to whom you owe duties, and how you must carry out those obligations. Being a trustee is not an easy task. It’s serious business and definitely NOT for everyone.
The point is this: there is a lot more to being a trustee than understanding the financial markets or whether to purchase stocks or bonds. You need to recognize this. Understand it. Accept it. And act accordingly. You need to understand what you are in for, and why you want to serve
Here’s A Scary Thought – Anyone Can Be A Trustee
Legally, there is no educational or experience requirement for one to serve as trustee. There is no law which requires you to have a college degree, let alone a graduate degree in finance, accounting or law, to be eligible to serve as trustee. No statute or rule requires you to have, for example, 20 years of investing experience, or prior trust work. The only thing that is required is that you are competent, that is: of majority age and of sound mind.
A 90-year-old can be trustee. A felon could be a trustee. A Ponzi schemer can be a trustee. An entrepreneur with numerous failed ventures and bankruptcy filings can be a trustee. There is no IQ test or examination to pass. A neighbor can be trustee. There is no duration or time requirement: some trustees are nominated who have only known the grantor a matter of days. And there are no dollar limitations. That’s right, the convicted felon who is nominated in a trust document to serve as trustee of a $250 Million trust can serve! What a country!
Realistically, do you really want someone with no understanding of investing, or a complete lack of experience with managing money, serving as the trustee of, say, a $5 Million trust? Of course not.
Ideally, you only want very experienced, knowledgeable, trust worthy, and intelligent persons serving as trustee. One can, however, make the argument that with the right counsel and investment agent, anyone with sound judgment can serve as trustee. Others would argue that that’s hogwash. You should have a competent trustee on board first and foremost. If there are family members, beneficiaries, that you want involved with the trusts, there already exist a number of ways to have that person involved without serving as trustee. The final decision on who shall be a trustee should be more of a business decision, or a financial and administrative decision, than a personal or familial decision. Likewise, your decision to serve or not serve as trustee should make sense in more than a personal way to you.