Common Pitfalls for Trustees and How to Avoid Them
The role of trustee is an important one. As a trustee, you have the responsibility of managing the trust and fulfilling the wishes of the grantor of that trust. In some cases, grantors decide to leave their trusts under the management of a bank or life insurance company that provides a standard set of management services after the grantor has passed away. Other times, the grantor will appoint a trustee or multiple trustees to manage the estate. Most people prefer to choose a family member or a trusted friend to serve in the role of trustee.
If you have been appointed as a trustee for your loved one’s estate, you will have to learn a lot of information within a short time. It is common for new trustees to make mistakes, especially early in the process. Here are a few things you can do to be an effective trustee:
Understand the Role of Trustee
The primary role of a trustee is to fulfill the wishes of the person who created the trust. The first thing you should do is read through the trust agreement so you understand the person’s wishes. It is important to note that managing a trust is not the same as owning the assets and property within the trust. Even if you are one of the named beneficiaries of the trust, that does not mean you have control over all the assets to use or distribute as you please. Make sure to follow the directions of the trust.
Do Not Violate the Rules of the Trust
There are very specific rules related to managing the assets within a trust. If you violate any of these rules, you could be removed as the trustee. Here are some things to keep in mind:
- Do not combine your own assets with the assets of the trust.
- Do not use the trust assets for your own benefit, unless it is explicitly stated in the trust.
- Do not give preferential treatment or distribute a greater proportion of the assets to one beneficiary over another, unless it is explicitly stated in the trust.
Those are just a few of the basic rules you must follow as a trustee. Beneficiaries have a right under Michigan law to remove a trustee who is violating the trust or is not fulfilling his or her duties.
Consult with an Attorney
Trust laws are complex. Even with the best of intentions, it is easy to make mistakes and inadvertently violate the rules of the trust. By consulting with an attorney upfront, you will be more prepared for whatever lies ahead. With the advice and guidance of an experienced trustee attorney, you can feel confident in your role as trustee and honor the final wishes of your loved one.