7 Tips for Non-Professional Successor Trustees

We at Mediation Path Silicon Valley deal regularly with non-professional successor trustees who are generally chosen based on their personal relationship with the deceased or the person needing help. As a reminder, a successor trustee is a person responsible for administering the trust after its grantor either passes away or becomes “incapacitated” and is unable to administer the trust for himself/herself.

We are well aware that being a successor trustee without the knowledge and experience of professional trustees is not an easy task as you will have to handle both money and people. Therefore, you will find below a few tips to help you navigate this unknown territory.

1. The Trust Instrument is Your Guide

Always read thoroughly the trust document. Whenever there is a question about how the trust is to be administered you should find the answer in the trust.

Also, we at Mediation Path Silicon Valley, believe it is a good practice to show beneficiaries the trust terms when a beneficiary asks for it. That said, you have to be aware that in some situations, sharing the whole trust document with all the beneficiaries can trigger bad feelings. For example, when one beneficiary is receiving more than others.

2. Most Common Tasks to Be Performed by a Successor Trustee

Remember, the trustee is under a duty to administer the trust solely in the interest of the beneficiaries. Bear this in mind when completing your successor trustee duties. The list of below about the most common tasks to be performed by a successor trustee is for informational purposes only and is not limitative.

• Get the death certificate;

• Notify the Social Security Administration of the death;

• Identify the trust beneficiaries;

• Inventory the trust assets;

• Get a taxpayer identification number for the trust;

• Transfer property into your name as trustee;

• Pay the debts when applicable;

Accounting furnishes data shall contain the following information:

• A statement of receipts and disbursements of principal and income that have occurred during the last complete fiscal year of the trust or since the last account;

• A statement of the assets and liabilities of the trust as of the end of the last complete fiscal year of the trust or as of the end of the period covered by the account;

• The trustee’s compensation for the last complete fiscal year of the trust or since the last account;

• The agents hired by the trustee, their relationship to the trustee if any, and their compensation, for the last complete fiscal year of the trust or since the last account;

• A statement that the recipient of the account may petition the court pursuant to Section 17200 to obtain a court review of the account and of the acts of the trustee;

• A statement that claims against the trustee for breach of trust may not be made after the expiration of three years from the date the beneficiary receives an account or report disclosing facts giving rise to the claim;

• All accounts filed to be approved by a court shall be presented in a manner described in the Probate Code.

3. Account and Information Report to Beneficiaries

Probate Code section 16060 provides that "the trustee has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration”.

Probate Code section 16062 requires the trustee to account at least annually, at the termination of the trust or upon change of trustees to each beneficiary to whom income or principal is required or authorized in the trustee's discretion to be currently distributed.

As a result, on reasonable request by a beneficiary, the successor trustee shall report to the beneficiary by providing the requested information to the beneficiary relating to the administration of the trust and relevant to the beneficiary’s interest.

Also, the trustee in dealing with a beneficiary on the trustee’s own account is under a duty to deal fairly and to communicate to the beneficiaries all material facts the trustee knows or should know in connection with a given transaction.

If you are both the trustee and a beneficiary from the trust. Executing properly your duty to account and inform beneficiaries will hopefully allow you to avoid some drama with some beneficiaries.

4. Account and Information Report to Beneficiaries Waiver: Be Careful

The trust, by its terms, can waive the right to an accounting, but a court can still order an accounting to be created where a beneficiary shows that a breach of trust is likely to have occurred.

Also, a beneficiary can waive in writing the right to an account. A waiver of rights may be withdrawn in writing at any time as to accounts for transactions occurring after the date of the written withdrawal. Regardless of the existence of a waiver of accounting by a beneficiary, upon a showing that it is reasonably likely that a material breach of the trust has occurred, the court may compel the trustee to account.

5. When in Doubt - Ask the Judge

Although the administration of the trust is typically not subject to Probate Court overview, if there is a problem with regards to the administration of the trust, the trustee can file a Petition for Instructions asking the Judge what to do.

6. Compensation of the Trustee

Most trusts provide the Trustee is to be paid a "reasonable" compensation. What's reasonable? Beneficiaries may think reasonable is a low amount, the trustee may think that reasonable is a high amount and, the judge may think otherwise. The best thing to do is to discuss this matter with the beneficiaries ASAP to avoid future conflicts.

7. Mediation over Litigation

If a dispute arises, the better course of action is to attempt to resolve the dispute before it becomes an all-out war played out.

Some trusts have a mediation clause. In that case, as a successor trustee, you can call in a mediator to attempt to resolve the issues.

If the trust does not include a mediation provision, as a successor trustee you must ask yourself what is the best interest of the beneficiaries: Hiring a mediator or going to court which is time-consuming and expensive?

We at Mediation Path Silicon Valley firmly believe that a court of law is not always suited and/or necessary to solve family issues mostly for the following reasons:

• In court, the parties are not given a chance to be heard by the judge. During mediation, you speak for yourself;

• The law is applied based on the facts as they are presented to the judge. In court, the judge decides without caring for the family member's emotions. Mediation deals with both facts and emotions.

• In a court proceeding, there is a winner and a loser.The mediation process allows the parties to design their own resolution to their dispute resulting in a solution that can benefit everyone.

Mediation Path Silicon Valley, LLC is devoted to supporting families. Call us, if we can be of assistance in helping you resolving a family dispute. Please note that, at MPSV, working remotely with family members, beneficiaries, lawyers etc. via video conferencing or conference calls is not something new to us. We are here to help and allow you to be safe while dealing with important matters.