Successor trustee advice

[The Cosmic Avenger]

I'm the successor trustee on my cousin's revocable trust. He is a retired single dad, and he doesn't trust his son to manage his money after he's gone, with good reason. I don't mind helping out, but I want to understand what I'm getting into, and if I don't like the way the trust is structured, I'd like to let my cousin know now so he can either change the trust (if he agrees with my point of contention) or find another successor trustee.

So my first question is whether I should contact the law office that drafted the trust, or our local estate attorney who drafted mine? They're in different states, and I know there are differences in the law, but how important is that vs. an attorney you know and trust? I don't doubt my cousin's ability or intelligence, but we do like our local estate attorney.

Second, I have two main concerns about the trust that I want to ask the attorney about. On the off chance that anyone has experience with these specific areas, I'd love to hear about it.

The first issue is that the trust states that it is a basic support trust, which is good, but it says that the successor trustee will "seek support and maintenance" for the beneficiary from public assistance, and collect and then distribute those funds. That seems weird to me, especially since while the son may have some emotional and maturity issues, he's really quite smart and generally seems competent, although I know he has impulse issues. It sounds from the document like he's on disability, which is a surprise to me. Still, wouldn't he need to be declared incompetent or at least give me POA for me to act as an agent for him for that doesn't originate from the trust?

The second issue is that there are two weird clause that seems to contradict the limited basic support part. One is that ALL installment payments from retirement accounts have to be immediately distributed to income for the trust and distributed to the beneficiary, which could be a LOT more than just basic support. There's another clause that talks about the maintenance of the son includes "recreational equipment" including video games! If this is more about letting him be a trust fund baby, I'd rather let a lawyer handle it. And my cousin definitely has enough to support his son in affluence.

If you made it this far, congratulations...but you get no sympathy from me, as I've just plowed through the entire trust tonight.

 

[RobbieB]

If you are uncomfortable with indulging your cousin's son as his father suggests, then bail.

 

[marko]

Why not sit down with your cousin first and ask him what he's thinking about? Sometimes things read differently than what is intended. You should have some leeway in the intent of the trust vs how it's written. My trusts give the trustees a good amount of discretion in certain situations.

 

[The Cosmic Avenger]

RobbieB, marko: I love them both and I want to help...if I support the way the trust is structured. I have a good idea that my cousin doesn't trust his son to manage his own money, much less an inheritance. The father supports the son, the son works very sporadically. But I think he's quite a capable adult, if a bit short on impulse control, so I'm concerned that it's too restrictive. So I think I know what the intent is but 1) I probably don't support the intent fully, and 2) I believe that in contract law, intent is mostly irrelevant if the terms and limits are explicitly spelled out.

I mostly need to figure out how much discretion this trust actually gives me, and I think that depends on the details of estate law.

 

[bingybear]

The trust will pay a high tax rate if income is not distributed. That is likely the reason that item is in there. But it does have a conflict with the issue of government support and basic needs. I've seen the needs for gov't support more for special needs or medicaid. Special needs does not sound proper based on your description.
I'm not sure how you would collect this gov't support, and where would you put it? in the trust?


So what do you get paid for doing all this?

 

[socca]

... but I want to understand what I'm getting into ...

Many people routinely turn down "opportunities" like this because of the risk of being sued by an aggrieved beneficiary (my mother spent $130k defending herself against a completely frivolous lawsuit a few years back - American "justice" at work ). If you're willing to plow ahead despite the risk, the broader your power to administer the trust as you see fit, the less risk the beneficiary will sue you for "doing it wrong". This power extends to investment strategy (reinvest or distribute earnings) and what constitutes adequate support (disclaimer: I'm not a lawyer; this advice is worth what you paid for it ).

An option to consider: hiring a bank trust department as co-trustee. I have seen this work well. One advantage: you can direct any complaints by the beneficiary regarding trust administration to the bank's trust officer.

Good luck!

 

[The Cosmic Avenger]

The trust will pay a high tax rate if income is not distributed. That is likely the reason that item is in there. But it does have a conflict with the issue of government support and basic needs. I've seen the needs for gov't support more for special needs or medicaid. Special needs does not sound proper based on your description.
I'm not sure how you would collect this gov't support, and where would you put it? in the trust?


So what do you get paid for doing all this?

Not sure, that's another thing I want to determine, although it's not really consequential, as I'd do it for free if needed. But the tax rate issue is good to know, thanks.

 

[The Cosmic Avenger]

Many people routinely turn down "opportunities" like this because of the risk of being sued by an aggrieved beneficiary (my mother spent $130k defending herself against a completely frivolous lawsuit a few years back - American "justice" at work ). If you're willing to plow ahead despite the risk, the broader your power to administer the trust as you see fit, the less risk the beneficiary will sue you for "doing it wrong". This power extends to investment strategy (reinvest or distribute earnings) and what constitutes adequate support (disclaimer: I'm not a lawyer; this advice is worth what you paid for it ).

An option to consider: hiring a bank trust department as co-trustee. I have seen this work well. One advantage: you can direct any complaints by the beneficiary regarding trust administration to the bank's trust officer.

Good luck!

Thanks! I'll ask Fidelity about the basics of working with a co-trustee, as I have dealt with them a lot, and I'll need to ask a lawyer how restrictive or permissive the terms of the trust are.

 

[Sunset]

OP - sorry to say, but once daddy is dead, the trust beneficiary may quickly decided they want all the money and control, and easily find a lawyer to sue you.

Be sure to start another thread, in a few years about defending from a lawsuit.

Why not just let a bank be the trustee.

 

[Bamaman]

It sounds as if an attorney that specializes in trusts needs to draw up the papers. Often, the beneficiary of the trust cannot either make proper decisions or they may have people surrounding them that influence them into making bad decisions. That's the time that a Special Needs Trust needs to go into force. And they're best paying specific expenses, like rent in an apartment, healthcare insurance and other basic needs. The Special Needs Trust also isolates the beneficiary from having assets that can be attached in lawsuits against them.

My daughter has 2 children she doesn't have custody of. She has no common sense about money, and we have a 7 year old and 10 year old to protect. We will be setting up a Special Needs Trust to go into force upon our deaths to go into force for them. It will include basic needs and their education until the trust is terminated when they become adults. We don't want them to become unproductive trust fund teenagers.

 

[marko]

RobbieB, marko: I love them both and I want to help...if I support the way the trust is structured. I have a good idea that my cousin doesn't trust his son to manage his own money, much less an inheritance. The father supports the son, the son works very sporadically. But I think he's quite a capable adult, if a bit short on impulse control, so I'm concerned that it's too restrictive. So I think I know what the intent is but 1) I probably don't support the intent fully, and 2) I believe that in contract law, intent is mostly irrelevant if the terms and limits are explicitly spelled out.

I mostly need to figure out how much discretion this trust actually gives me, and I think that depends on the details of estate law.

I see.
The way that the 1) trust I'm a beneficiary of, and 2) my own trust to others is written is that the trustees have a fair amount of discretion to adjust to changing environments.

Ten or twenty years down-line is a long time and people, economies and general life situations can change beyond the intent of the trust when it was written.

I'd maybe talk to the lawyer who wrote the trust.

 

[youbet]

OP’s cousin should use a professional trustee. OP should run from this potential assignment as it’s all downside.

 

[OldShooter]

OP’s cousin should use a professional trustee. OP should run from this potential assignment as it’s all downside.

+100

Edit: To amplify, the nature of a trust is that the trustee has some discretion re what the trust does for the beneficiary. The standard mantra is "HEMS" -- Health, Education, Maintenance, and Support. It is inevitable that at some point the trustee and the beneficiary will disagree about a requested disbursement. This is a guaranteed recipe for family friction, possibly to a high degree if the family splits over the trustee's decision. Assuming the OP wants peace in the family and with the beneficiary, he/she needs to get out of the line of fire. At most, he/she should be co-trustee with a hired professional making the decisions and absorbing any anger.

Re lawsuits, no professional trustee would accept the trust unless the trustee is indemnified against lawsuits. IOW, the trust pays for defending the trustee. This has a virtuous dampening effect on lawsuits because the beneficiary is effectively spending his/her own money on both sides of the disagreement.

 

[pb4uski]

.... Re lawsuits, no professional trustee would accept the trust unless the trustee is indemnified against lawsuits. IOW, the trust pays for defending the trustee. This has a virtuous dampening effect on lawsuits because the beneficiary is effectively spending his/her own money on both sides of the disagreement.

+1 To OP... if you do decide to take this on, insist on an indemnification clause... if they refuse to add one then decline.

 

[The Cosmic Avenger]

Thanks, I'll insist on an indemnification clause if I decide to do it. I want to do it, as while I'm younger than the dad I'm older than the son, but I don't want to be a full-on surrogate parent, just a parental figure. (Mostly a matter of degree, I suppose.) If the son is really unable to take care of himself, I want to help, but from spending days with him he seems perfectly fine, more capable than plenty of people I know.

I'll reserve judgment for now, I think, until we get some of these questions resolved.