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The Importance of Understanding a Trustee

After the initial feelings that come with learning that you are the heir to an estate, oftentimes the pesky details start to set in. When a relative passes, there are so many things to deal with that it can be hard to gain a perspective in the moment. The processes may include making arrangements, grieving, and regenerating family bonds and sometimes, they sometimes overshadow other concerns and make them seem insignificant.

It's a common story in the passing of wealth from one generation to the next. Just as a son loves a father, a mother loves a daughter, but do not necessarily always see eye-to-eye in life, the same applies after death. Upon the death of a relative, one may be simply feel happy learning that he or she is the beneficiary of an estate valued at x amount. It is only later that the realization that x amount is not immediately at one's disposal sets in.

Since the beneficiary is by far the most likely to take issue in this type of situation, this article deals with it mainly from their point of view. While the act of naming beneficiaries is one of love, being on the receiving end is many times confusing because of the strings attached. And, although many will attest to the fact that those strings can cause a lot of frustration, there are few who would say addressing them with a calm head is not a worthwhile process. What's more, the process can even lead to a better understanding of the decedent. However, there are also times when one is a beneficiary as a result of a statute, when there is no Will. In that event, all heirs entitled to inherit must be located and accounted for, regardless of their knowledge or involvement with the decedent. This is where heir finding firms are very beneficial. Until all of the heirs are located, no disposition will usually take place.

Those who oversee the administration of an estate have several different names: They can be called Executor, Executrix, Administrator, Administratrix, Personal Representative, and Trustee. Regardless of the title, their job is the same.

Most trust documents and Wills have been crafted with standard legalese designed to cover all possibilities. As a result, the language used can often only be understood by a CPA or legal professional. Considering the importance of beneficiaries understanding trust agreements, Wills, or when there is neither, this fact can be especially unfortunate. It can lead to fundamental misunderstandings, which, if left neglected, may turn into unnecessary disputes and large, drawn-out headaches for all involved. Aside from the trouble of comprehending relevant documents, it turns out that many beneficiaries have never even read them and that can be because they were never received, but maintained within in a drawer in the lawyers office until needed. Like it or not, there is no requirement that trusts or Wills be shared with the beneficiaries or heirs, until after the decedent's demise.

It is imperative that before taking any grievances to the courts beneficiaries make a concerted effort to understand the basics of their relationship with trustees and Administrators. And the most elemental basic is the relationship itself. Beyond the legal and practical matters, beneficiaries are often confronted with the additional emotional baggage that comes along with an inheritance. When a trustee or Administrator is appointed to an estate, beneficiaries can be left asking themselves why a third party was even involved. Surely, they may think, it would be much better if these assets were under their direct control.

Nonetheless, the fact cannot be changed after an Administrator or Personal Representative has been designated. The best thing to do, from the beneficiary's perspective, is to work with that individual within the spirit and guidelines of the Will or statutory guidelines when there is no Will. It may be useful to remember that, besides adhering to the terms of the Will or trust if existent, one of the main obligations of the Executor when taking on the role, is to administer the decedent's wishes in the best interests of all the beneficiaries. If there is more than one beneficiary, the Executor is also prohibited from favoring any one at the expense of others. These rules, in addition to many others set in place to best procedures to protect the interests of all parties, strictly limit any arbitrary actions by trustees, and should be thoroughly understood by beneficiaries.

Matters can be further complicated when the Administrator appointed is a family member. Perhaps the decedent is a woman who leaves a massive estate to her husband, but her son is the executor. Questions might very naturally occur in the husband's mind as to why control of assets was not left in his hands. He might ask himself if he was really trusted by his spouse and perhaps even project these feelings onto the son, seeing aspects of the imagined distrust in the son's executive decisions. This situation could be reversed or morphed into any other number of familial relationships.

Beneficiaries must be aware of the facts in situations like this. First, if a trust has been set up, it was according to the decedent, for the welfare of one or more beneficiaries, and the trustee is legally bound to honor this. While the trustee can sometimes be seen as just an obstacle between beneficiaries and what they want, it is also critical to note that trustees are regularly put into very difficult positions. In addition, outside of showing malfeasance or negligence, it may be next to impossible to change trustees. And even when litigation is appropriate, it may be long and costly. Some trusts and Wills provide that if they are contested, the share due the contesting party is reduced to one-dollar. That is not only legal, it is of significant concern. In short, all possible avenues of cooperation should be fully explored before the possibility of litigation is entertained.

That said, the necessity of obtaining legal council is likely to come long before. In most cases, there is a need as soon as a beneficiary feels they do not fully understand the terms of the agreement. Besides being able to help understand those documents in plain language, a seasoned professional can also help you approach the issue in a dispassionate way, list and prioritize your concerns or grievances, and chart out the best course towards an acceptable resolution.