This article is not intended to provide investment, legal, tax, accounting or medical advice. Before making decisions involving investing, legal, tax, accounting or medical concerns, you should consult appropriate professionals regarding your specific situation.

If you are involved in the drafting of trust documents, you have likely considered — or been asked directly — whether you, as the drafting attorney, can act as a trustee for your clients. As an attorney, you are accustomed to being upheld to certain standards and rules, but the complexity, diversity, and liability of acting as a trustee can still be daunting. 

Serving as a trustee introduces a variety of new responsibilities and tasks, but above all else, a fiduciary has the duties of loyalty and impartiality to their beneficiaries. Here are some of the key duties and potential pitfalls you’ll want to consider before stepping into the role of attorney-trustee.

The Basics of Fiduciary Duties

• The duty of loyalty, at its core, requires any fiduciary to act in the best interest of the beneficiaries. A trustee should never act in their own self-interest (known as “self-dealing”) or in the interests of parties other than their beneficiaries.
• The duty of impartiality requires a trustee to treat all of their beneficiaries similarly and fairly, without bias or preference for any one beneficiary. This includes disregarding race, sex, sexual orientation, age, religion, country of origin, political views, morals, etc.
• The duty of care is also referred to as the duty of prudence. Essentially, this duty requires all trustees to act reasonably, as any prudent person would, when managing a trust. When a trustee is notably skilled in certain areas of trust administration, they will be held to a higher standard of care or prudence when it relates to those areas. When a trustee is not skilled in certain areas, it is often recommended that a trustee delegate those duties to an experienced professional.
• The duty to report requires the trustee to appropriately inform beneficiaries of decisions made on behalf of the trust. Most states have their own specific requirements in regard to clear and accurate accountings of the trust’s administration.

Putting these Duties into Practice 

Wanting to abide by these duties and ensuring you are appropriately following them are not always the same thing. Here are some examples of where situations can get tricky: 

Your morals and that of a beneficiary aren’t aligned

As an individual, you may have clear standards for what are good or bad uses of money, but this doesn’t mean your beneficiary has the same belief (this can come up with items of a sexual nature or medicinal marijuana). If you choose to deny a distribution request purely because of your own viewpoints, you would likely be in breach of the duty of loyalty. 

‍Note: It is imperative for every trustee to remember to set aside their own personal values and biases when administering a trust. A trustee is not employed to be a beneficiary’s moral compass or as a substitute parent for the beneficiary.

You’re too protective of assets

In the case of Special Needs Trusts (SNTs), inexperienced trustees might find themselves drawn to ultra-conservative distribution policies out of fear of making mistakes that could compromise public benefits. While this may be well-intentioned, it could be interpreted as self-dealing – the trustee is unnecessarily holding back funds from a beneficiary because they are focused on avoiding liability or litigation (or potentially keeping the trust balance high to charge more in fees for assets under management). 

Note: It is imperative that the trustee be appropriately informed about regulations that impact the trust. In the case of SNTs, this requires knowing and following the rules around using Social Security or Supplemental Security Income (SSI) benefits. 

You try to do too much yourself

For attorneys who have been able to manage most aspects of client relationships in house, taking on the role of trustee may introduce the need for expertise outside of the practice (e.g. case management, guardianship, investment advice, etc.). No matter how well-intentioned, those who attempt to take on these responsibilities on their own, may be in breach of the duty of care, which recommends delegation of tasks to an experienced professional if the trustee is not skilled in that area. 

Note: It is valuable to understand the limits of your expertise, so that you can supplement effectively. Also, make sure the lines of duty and responsibility are clear with any third-parties you work with, and that they have the same commitment to your fiduciary duties as you do. For example, when choosing an investment manager, they should be familiar with the tenets of the Uniform Prudent Investor Act.

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Of course, every situation is unique, and these are just a few things you should keep in mind as you consider becoming a trustee. If you have questions about stepping into this role, you can reach out to Peter J. Wall, the Director of Fiduciary Services for True Link Financial Advisors, at peter.wall@truelinkfinancial.com. 

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