Friday, March 4, 2016

The Trustees and what you need to know

When people hear of the word "trust," they typically have trouble understanding what that term means.  How can a trust hold title to your house or any other asset.  Imagine a trust to be a big basket.  The same kind of basket that holds easter eggs.  In this big basket, you have a variety of assets from your house to securities such as stocks and bonds. This basket also contains checking accounts and saving accounts.  Although these assets have been safely placed into a trust, an individual or entity (trust company) needs to be named to manage, control, and make any distributions from the trust as they come due.  The title of this designated individual is the trustee.  The trustee has a fiduciary duty to ensure that the assets in the trust are being maintained properly and that they will be disbursed to the appropriate party as requested by the creator of the trust (also known as the grantor). The trustee may also be charged with investing on behalf of the trust. Unless they are directed to invest into volatile investments, generally the trustee is expected to make smart, conservative investments.  Remember to consult with a New York Estate Planning Lawyer in a case dealing with a trust.

You will hear individuals refer to Independent Trustees and Family Trustees. Independent Trustees are friends, banks, accountants, CPAs, trust companies, or lawyers who are not named as the beneficiary in the trust. They have no skin in the game. They do however receive compensation for their involvement with the trust. Quick tip: Have a line of succession ready. What a line of succession means is a line of all the individuals who should become a trustee in case the initial trustee passes away or decides to step down. Family Trustees are family members of the grantor who are selected to be trustees of the trust. In this scenario, they can be beneficiaries. What you have to consider is creating defenses from your Family Trustees in order to stop them from committing decisions that would be self-serving. A New York Estate Planning Lawyer can identify any possible pitfall relatively easy as far as protecting the trust is concerned.

An ideal trustee will honor your wishes, and rightfully manage your assets.  However, as most people know, people get greedy and start making self-serving decisions when money is in their hands.  Is it wise to have only one person involved as the trustee? If your estate is big enough and you can afford it, consider having an odd number of trustees and institute a voting requirement prior to any material decision being made on how trust assets should be invested. The entire point of a trust is to have the assets eventually end up in the right hands. By creating a voting requirement and having more than one party involved, you establish a stronger defense against wrongdoing. I have seen scenarios where a trust was created over a decade ago and the trustee (which in this case was a trust company) invested in extremely volatile stock positions. Sure enough, the assets in the trust lost a total value of 80%. If the initial lawyer had been more careful, they would have directed the trustees to invest only in the most conservative of investments. It would have been even better to get a second trustee involved to police the possibility of reckless decision making. This is why getting a second opinion on all matters regarding estate planning are important. Retaining a New York Estate Planning lawyer to police an existing trustee would be helpful in your cause. You set up a trust to take care of a close friend, a loved one, or an organization. You do them a great service by seeking more than one attorney to advise you on the matter. Consider having your signature implemented under each clause of the trust. I have seen cases where the signature page was on the final page of a trust, however, the first several pages were altered to better serve the trustees. Estate Planning is all about safeguards.

Do not hesitate to contact us in the event concern arises of the wrongdoing by a trustee or by an executor if you are dealing with a probate matter. Our New York Estate Planning Lawyers have the knowledge and experience to defend you in all manners dealing with trust, probate, and estate planning. At Mishiyeva Law, we handle general estate planning matters as well as controversial estate needs. Located in Downtown Manhattan at 85 Broad Street, New York, NY 10004 or call us at (646) 736-6328

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