Being a trustee can be a thankless job. Sometimes a disgruntled beneficary can make life for the trustee stressful. Troublesome beneficiaries often demand early payment, insist they are entitled to more, or accuse a trustee of something improper. Like divorce cases, when it comes to the family estate, some trust beneficiaries will take a hostile position against the trustee, sometimes motivated by preexisting family discord. While the beneficiary may or may not have a legitimate claim, the trustee must be tactical when dealing with a disgruntled trustee.
Trustees owe fiduciary duties to beneficiaries, including the difficult ones. A trustee can be held personally liable for breach of their fiduciary duty. This might involve putting their own interests before the interests of the beneficiary. Therefore, a trustee must take the beneficiaries concerns seriously and properly address them. The trustee must never sink to the angry beneficiary’s level of conduct.
When a beneficiary starts making demands and threats, it’s best to talk to a trust lawyer who can preempt a lawsuit through countermeasures. If a beneficiary retains a lawyer, the trustee should immediately retain counsel for the trust.
Fortunately for the trustee, in Nevada, the trust generally pays for the trustee’s attorney fees and costs of administration. The trustee is also entitled to payment for their own time in administering the estate in good faith.
Reno trust attorney Kevin P. Walsh writes these five-tips for the trustee dealing with a difficult beneficiary:
- Keep a Trustee’s Diary. Make notes in a diary of all the things you do on behalf of the trust, and all of the beneficiaries relevant conduct. Remember, this could be later read by a judge so keep it factual, clean, and professional. Also, correspondence to the beneficary sent by certified mail confirming what they did and said can be used later as powerful evidence. Remember, this is not the time to vent emotions. Write like a professional keeping to the facts.
- Maintain a Spreadsheet of Assets, Income, and Expenditures. You don’t need a degree in accounting or the Excel program to keep a simple spreadsheet. Start with an inventory of assets. When expenditures are made and income is received the transactions must be recorded with the date, purpose, party involved, and amount. Nevada Revised Statute (NRS) 165.135 contains the form and contents of the account for a trust in Nevada. The trust instrument might deviate from this form by requiring more, or less information.
- File all receipts, correspondence, notes, and anything else relating to the trust. Dedicate a separate file drawer of box for hard copies of items involving the trust. Make sure it’s organized alphabetically and not randomly stuffed with documents. Your attorney will appreciate you if legal help is needed. Being organized ensures combat readiness. It will save time and money and help keep you relaxed and confident if a beneficiary challenges the trust or you as trustee.
- Always be the Professional. Judges and mediators will always gravitate toward the more professional and credible party in a close case. Never send text messages, emails, or voice messages that you wouldn’t want a judge or mediator to see or hear. Dress in business attire for bank appointments and other trust business. You are entrusted with representing the estate of a deceased person. Do it with pride and dignity. By looking and acting like a professional you will garner more support and compliance from people you must transact business with, including family beneficiaries.
- Read the Full Trust. I like to say the acronym “RFT” – for READ the FULL TRUST. It’s surprising how many trustees never read and diligently try to understand the trust instrument and other estate documents. We all know it’s dry and boring reading, and much of it might be characterized as gobbledygook. In reality, these are the decedent’s instructions to the trustee. If the trustee does not read and follow the instructions of the trust, the trustee might unwittingly breach a legal duty and create legal problems for themself, the trust, and beneficiaries. Read the instrument with confidence and imply ordinary meaning to the words. The document probably means exactly what you think it means. Look up definitions of unfamiliar terms. I do this constantly even as a lawyer after 25 years of practice. Consult a lawyer if you don’t understand key terms.
Acting as trustee can be a burden when it shouldn’t be. That’s why the decedent’s trust estate pays for the trustee’s legal fees when burdens arise. Trust attorney Kevin P. Walsh recommends consulting a qualified attorney, paid for by the trust, if a disgruntled beneficiary is complaining about your performance as trustee.
Attorney at Law
Estate Planning Attorney in Reno, Nevada