When it comes to legal matters, there are often specific terms that can be confusing for those who are not familiar with the law. One such term is “trustee“. A trustee is someone who has been given authority by another person (the trustor) to hold and manage property or assets for the benefit of another person (the beneficiary).
The trustee holds these assets in trust until certain conditions have been met, at which point they are transferred to the beneficiary. A trustee can be an individual or an institution, such as a bank.
A common example of the use of a trustee is in the creation of a trust. When a person creates a valid trust, they may grant authority to another person (the trustee) to hold and manage property or assets for the benefit of another person or persons.
Should My Attorney Act as a Trustee?
If you are thinking about it, you should think again. While it may seem like a convenient and great idea at first glance, appointing your attorney as the trustee of your trust could be problematic for your attorney.
There are a number of ethical risks that may arise for an attorney when they are appointed as a trustee. Additionally, trustee compensation for trust management may be limited when the drafting attorney is acting as the trustee.
An attorney may decide it is not profitable to serve as a trustee in addition to their original role as an attorney because the limits on compensation equate to more work for less money.
If you are thinking about appointing your attorney as the trustee of your trust, be sure to weigh all of the risks and rewards involved before making a decision. Your best bet may be to find a qualified and experienced trustee who is not also acting as your attorney.
What Potential Conflicts Arise When an Attorney Acts as a Trustee?
By understanding the potential conflicts that can arise by having your attorney act as your trustee, you can better protect yourself and your beneficiaries.
When an attorney becomes a trustee there are several potential conflicts that may arise, including:
- The Duty of Loyalty: As a trustee, one must always act in the best interests of the beneficiaries and not their own interests, which can often be difficult when disagreements among beneficiaries arise or when you have conflicting roles as an attorney and trustee.
- The Duty of Prudence: A trustee must use due care when making investment decisions and must also diversify their investments in order to minimize risk. If the trustee is also an attorney acting as a broker for their trust portfolio, they may be at risk for violating state securities laws
- The Subsidiary Duties: Trustees have several other responsibilities such as informing beneficiaries of their rights and responsibilities, keeping accurate records, and avoiding self-dealing transactions.
If you are an attorney who is also a trustee, it is important to be aware of these conflicts and take steps to avoid them. By understanding the potential conflicts that can arise, you can better protect yourself and your beneficiaries against any potential breach of fiduciary duties.
If I Appoint My Attorney as My Trustee, Do They Have to Accept?
When creating a trust, one of the most important decisions you will make is who to appoint as trustee. This person will have a huge responsibility for overseeing the management and distribution of your assets according to the terms of the trust.
If you are considering appointing your attorney as the trustee, it is likely that they will not accept this position. Trustees can be appointed either by the creator of the trust or by a court, but in order to accept the position, trustees must voluntarily agree to do so.
Once appointed, trustees cannot resign without obtaining consent from all beneficiaries or with permission from a court. As strange as it may seem, there are some very good reasons why attorneys are likely to decline the appointment of a trustee.
First and foremost, one of the biggest reasons why attorneys generally do not accept appointments as trustees is that they may be limited in their ability to be fully compensated for their services.
Trustees are typically paid a fee for their services, but this fee is often much lower than what an attorney would normally charge for providing legal counsel. In addition, trustees can also be responsible for paying any expenses related to the administration of the trust, which can add up over time.
Another reason why attorneys decline appointments as trustees is because of their obligations to their clients. As attorneys, they are ethically obligated to provide competent representation and advice to their clients. Serving as the trustee often requires a great deal of time and attention, and it may be difficult for attorneys to fulfill their obligations to both the trust and their clients.
Finally, attorneys often decline appointments as trustees because of the potential liability they could face. Trustees can be held liable for any losses or damages that occur due to their actions or inaction as trustee. This liability can be significant, and it is often not worth the risk for attorneys to accept this position.
While there are many reasons why attorneys will likely refuse appointments as trustees, there are also some situations where they may be willing to serve in this role. If you have a good relationship with your attorney and believe that they would be a good fit for a trustee, you can always ask them if they are interested in serving.
If all beneficiaries agree and the court permits it, an attorney can serve as trustee. However, it is important to remember that this is not always the best option, and there are many other qualified individuals who could serve in this role.
If you are considering appointing an attorney as trustee of your trust, be sure to weigh all of the pros and cons before making a decision. Trustees play a critical role in the administration of trusts, and it is important to choose someone who is capable and willing to take on this responsibility.
Should I Hire Another Lawyer If I Wish to Appoint an Attorney as My Trustee?
There are many factors to consider when making the decision to appoint an attorney as a trustee, and it is important to seek independent legal counsel in order to protect the interests of all involved.
An attorney who is hired solely as the trustee may be in a better position to negotiate and enforce the terms of the trust than your family attorney or one you already have on retainer for other matters.
Conflicts of interest can often arise when the same person holds multiple roles. For example, the trustee might have to make decisions that could benefit themselves or their family financially which could create a conflict of interest.
A well-qualified estates lawyer can help you draft clear and concise trust documents which can help to avoid any potential problems down the road. They can also assist in mediating any disputes that may arise between beneficiaries and trustees.
By taking these precautions you can help ensure that your trust runs smoothly and efficiently. It’s a good idea to contact a lawyer with no conflicts of interest if you have any questions about the duties of trustees or would like advice in navigating the trust process.
