Conversely, the disadvantages associated with an individual trustee include limited protection for the trust assets in the event that the individual trustee is subject to legal action and the inability to distinguish between personal and trust assets.
Pros of Serving as an Executor or Trustee
This can provide a sense of personal satisfaction and honor, knowing that you are contributing to their legacy. By efficiently and fairly administering the estate, you can help to maintain harmony among surviving family members and reduce the potential for disputes.
An independent trustee provides objectivity and third-party input can help prevent the trust from being seen as a sham. A trust is more open to attack if the trustees are thought to be simply dealing with the trust's assets as if they were their own. This is more likely to occur when there is no independent trustee.
No, a trustee is almost never allowed to withdraw money from a trust account for personal use.
A trustee must abide by the trust document and the California Probate Code. They are prohibited from using trust assets for personal gain and must act in the best interest of the beneficiaries. Trust assets are meant for the benefit of the trust beneficiaries and not for the personal use of the trustee.
You can either take your fee annually at the end of the calendar year or take it in one lump sum at the end of the trust administration. We generally recommend taking an annual fee. This strategy often has income tax advantages for the trustee.
In contrast to the individual trustee, who is typically a family member, the independent trustee focuses on making objective decisions without emotion, either as sole trustee or with a family member co-trustee.
Naming the same person as trustee and beneficiary can be problematic. Not only can it lead to a trustee and beneficiary conflict of interest, but it can make it difficult for the trustee to uphold their duty to treat all beneficiaries equally.
Choose people you can rely on to be your trustees and make sure they're happy to take on this responsibility. You should have at least two trustees but can choose up to four.
A trustee can end up having to pay taxes out of their own personal funds if they fail to take action on behalf of the estate in a timely way. Of course, they can also face criminal liability for such crimes as taking money out of a trust to pay for their own kids' college tuition. Yup, that's stealing.
Experience and Knowledge. Another key consideration is whether the individual or entity is qualified to act as trustee. If the trust has substantial assets, an individual with experience managing significant assets or with a background in finance or investments may be better suited to the role of trustee.
Serving as the trustee of a trust instills a person with significant power. They have access to all the trust assets, but with a catch: They can only use those assets to carry out the instructions of the trust.
Upon the death of a trustee, it is normal practice for the their legal personal representative (the executor or administrator of the estate) (LPR) to stand in their shoes in their capacity as either an individual trustee or a director of the corporate trustee so that the fund still falls within the definition of an ...
Anyone 16 and over (18 for an Unincorporated Association or Charitable Trust) who is not 'disqualified' can be a Trustee. The reasons for disqualification were set down by the Charities Act 2011, and were designed to prevent people convicted of financial crimes, or who made serious financial errors, becoming trustees.
This is a fundamental concept of trust law: the separation of legal and equitable title. In other words, while the trustee has the legal authority to manage and control the assets, they do so not for their own benefit, but for the beneficiaries.
While trustees may temporarily be able to delay trust distributions if a valid reason exists for them doing so, they are rarely entitled to hold trust assets indefinitely or refuse beneficiaries the gifts they were left through the trust.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
An individual trustee is simply a natural person or persons acting jointly who hold the legal title to the trust's assets. Likewise, they hold these assets for the benefit of the beneficiaries. The trustee is responsible for carrying out their duties under the trust deed.
While it is not uncommon, there are a few potential legal pitfalls you may wish to think about before appointing someone as a trustee and beneficiary at the same time. These include: Potential Conflicts of Interest: The primary issue with a trustee who is also a beneficiary lies in the potential conflict of interest.
From a legal standpoint, you can appoint yourself as the Trustee of any trust you create, whether it is a revocable or irrevocable trust. Appointing yourself as the Trustee of an irrevocable trust in which you are also the Settlor, however, would almost always defeat the purpose of making the trust irrevocable.
Ultimately, trustees can only withdraw money from a trust account for specific expenses within certain limitations. Their duties require them to comply with the grantor's wishes. If they breach their fiduciary duties, they will be removed as the trustee and face a surcharge for compensatory damages.
Reasonable compensation is the value that would ordinarily be paid for like services by like enterprises under like circumstances. Reasonableness is determined based on all the facts and circumstances.
For instance, trustee fees are deductible in full because these fees are by definition incurred only when assets are held in trust.