Part Three of our series on Personal Representatives and Trustees concludes with some common questions. (Part 1 — “Serving as Personal Representative or Trustee, A Step-by-Step Guide” — is available here; Part 2 — “Personal Representative? Trustee? What are these titles and who should get them” — is available here).
1. Can I be sued or be held personally liable?
Part of being a fiduciary means that any errors or mismanagement on your part can open you up to being held personally liable. This often happens with fiduciaries who are new to the position. Many people don’t fully understand the ramifications of not paying taxes or filing returns on time, making the wrong kind of investments or engaging in self-dealing without express permission. Other common mistakes include allowing property or casualty insurance to lapse, or failing to collect rents on time, both of which can result in a loss to the estate.
We cannot overemphasize the benefit of having a professional by your side as early as possible in the process. Be sure to communicate regularly with the beneficiaries, treat everything with appropriate formalities, and fully document your actions and decisions.
2. What happens if a someone complains?
No one wants to think that one of their relatives will be angry with them for carrying out the wishes of the deceased, but it happens all the time. Even professional fiduciaries get complaints. The best way to avoid complaints is to carefully follow the instructions in the estate plan, consulting with an experienced attorney if necessary. Most of the time, complaints can be avoided by keeping the beneficiaries up to date about the process and making sure that all money in or out is accounted for in a precise manner. You will be protecting yourself, as well as giving the family a clear picture of what is happening. It’s also a good idea to handle all matters with appropriate formality. If, despite your best efforts, you do encounter a complaint that requires court involvement, consult with an attorney who specializes in trust and estate matters who can guide you through the process.
3. Where should I hold the estate or trust assets?
A good option is to open an investment account with a bank, trust company, or brokerage company in the name of the estate or trust. It is essential to keep all the estate assets separate from your personal accounts. All expenses and disbursements must be made from the estate accounts, and you should keep track of your statements and receipts.
4. How do I title (own) bank and other accounts?
If you are a Trustee: Not all types of assets can be held by an entity. Retirement accounts, for instance, have to be titled to a person. In these cases, you might want to name the Trust as the Designated Beneficiary (the rules for who can be designated as a beneficiary of a tax-deferred retirement account are complex, and you should consult with a lawyer about it, especially if you plan to name a minor or a trust). For assets that can be owned by the Trust, check first with your bank, financial institution, or investment firm, as many companies have their own requirements. Basically, you usually want to name the Trust and yourself as the Trustee (in Colorado, the practice for titling real estate is slightly different and should be. So you might use “Cleopatra VII Philopator, Trustee of the Ptolemy Caesarion Living Trust dated June 23, 47BC.”
If you are a Personal Representative: To title assets to the estate of the deceased, you should use “Gaius Octavius, Personal Representative, Estate of Julius Caesar, Deceased.”
5. How do I sign my name in a fiduciary capacity?
A trustee will sign as: “Cleopatra VII Philopator, Trustee”
A Personal Representative will sign documents as: “Gaius Octavius, Personal Representative of the Estate of Julius Caesar, Deceased.”
6. Can I get paid?
Yes! Serving as a fiduciary is not only time-consuming and difficult, but it carries with it a great deal of personal risk. So it is absolutely appropriate to be paid for your services. The Will or Trust should have provisions that address how much you can be compensated, and where the funds may be withdrawn. If the document does not specify this information, consult with an attorney. Usually, an agent is allowed “reasonable” compensation, which usually takes into account the size of the estate, the complexity involved, and the amount of time the fiduciary has put into the job.
If you are related to the deceased, it may seem as though you should do the job without any payment as a gift to your loved ones. But don’t be too hasty to waive compensation. You should consult with an experienced estate planning and trust attorney to make sure you understand the full scope of your duties and any ramifications of your decision to waive fees. If you need to rent a storage unit to hold the deceased’s personal property, will that be at your personal expense? Say you need to take a leave of absence from your day job — will the loss of income be something you are willing and able to forgo?
7. What if I want to resign?
Whether you stop acting as a fiduciary because the estate has been closed, or you wish to resign before the conclusion of the process, you must be formally discharged. This can be accomplished either by the local court or by the beneficiaries. If you are resigning prior to the conclusion of your administration, check the Will or Trust to see what the process is to accomplish this, and who may succeed you as fiduciary.
Serving as a fiduciary is an important job, not just a special honor or empty gesture of respect. If you are creating a Will or Trust, choose wisely the person you name as Personal Representative or Trustee. And if you are named as an agent in someone’s Will or Trust, be sure to research carefully the responsibilities of your position and hire help if it’s needed. We are a full-service estate planning law firm and can help you in every aspect of the process. Do you have questions? We have answers! Contact us online or via phone to schedule a consultation.