For over 25 years, we have been in the business of helping our clients with their financial matters. In our many years of experience, we’ve seen even the most complex of family situations.
In one instance with the Jones Family, Mark and Sarah Jones chose their oldest child Thomas to be their successor trustee. Once both parents passed away, Thomas took over handling all bank and brokerage accounts while getting in contact with his parents’ pensions, IRA companies, and life insurance providers.
As Thomas managed these, in addition to repairing his parents’ house, without help from his siblings, he began to feel bitter. Perhaps he felt entitled to some money in his own eyes since he began to take money out of the trust for the work he had put into it. While the payments he was giving himself were quite high, Thomas felt it was justified for his efforts.
Unfortunately, from there things got worse. Thomas’ siblings contacted him about the trust and wanted to know what happened to the assets since their parents died. Thomas refused to tell them anything prompting his siblings to seek legal recourse. He then had his own attorney seek the services of Marcia L. Campbell, CPA.
To dive deeper into the aspects of this particular family situation, Marcia L. Campbell, CPA answers questions on the proceedings.
How do you avoid an (adult child) trustee becoming resentful if there are siblings that do not help the trustee?
Marcia L. Campbell, CPA: “You can’t avoid this situation by the trust documents only. It’s the trustee’s responsibility to take care of and distribute the assets according to the trust instructions. However, the trustee might hope and communicate that hope to the siblings that he/she would appreciate the help to deal with gathering the assets, cleaning, sorting, selling and then the final distribution of the cash and remaining assets. Sometimes the siblings get resentful that Mom and Dad chose one (usually the oldest) over the rest of them. Then the thought process is that child got picked so they should get stuck with all of the work. This holds true even more if the trustee is going to get paid according to the trust documents.”
Is there anything parents can do when making a trust to help make sure that the siblings work together instead of in opposition?
Marcia L. Campbell, CPA: “Not really. The parents can suggest that they work together in the trust document or at a family meeting before they pass but there isn’t any way to force them to do it.”
How can parents make sure that a trustee (who is their child) is able to manage the trust properly?
Marcia L. Campbell, CPA: “Unless they are familiar with probate code and accounting for assets, a child is not a good choice to manage the trust property. There are a lot of probate rules that have to be followed, asset titles that have to be reviewed, and banks and brokerage accounts that need to be dealt with. The trustee also needs to be able to understand what the trust states and how to interpret and put into place those instructions. A professional fiduciary is a much better choice for the trustee.”
What could the trustee or siblings have done differently to avoid their family problem and the trust’s assets being improperly used?
Marcia L. Campbell, CPA: “The worst enemy of the trustee is a lack of communication especially with siblings. The more you let them know what is happening and the projected results, the more comfortable everyone is with the issues and the time it takes to complete everything. If there is no communication, siblings have a tendency to assume that something is wrong. They may jump to the wrong conclusion about what is happening with the assets including the fact that the trustee is using the assets for himself/herself.”
Are there any penalties or repercussions for a trustee who “borrows” money from a trust but “forgets” to repay it?
Marcia L. Campbell, CPA: “Most trusts have a requirement for a trust accounting to be done once a year. If this is actually done and distributed to the beneficiaries, then they can review what transactions have actually taken place in the year. When the annual trust accounting is not done, it is easier for the trustee to “borrow” money with the intention of putting it back soon. When the beneficiaries find out that this has happened, they normally are very upset. When it comes to actually making a distribution, the trustee’s portion can be decreased by the amount of the loans if there is a sufficient amount of assets. If there isn’t enough money left to do that, the beneficiaries can go into court for a decision on what should happen next. That could be a fine from the court, the removal of the trustee, and in some circumstances a lien could be put on the assets of the trustee.”
Why did the siblings take 4 years to contact the trustee about the assets?
Marcia L. Campbell, CPA: “Most siblings want an immediate distribution of the assets and get frustrated when told it is going to take a while to gather everything together, and maybe even find all of the assets. It’s only after everything is completed, that distributions are made. Sometimes, the trustee doesn’t communicate at all about what is happening with the trust or just tells the beneficiaries that they are “working on it” or won’t tell them anything. After experiencing frustration with the trustee for a period of time, the beneficiaries may contact a lawyer. Usually, that’s when the trust accounting is done. That delay might be two years or more.”
How long did the court accounting take?
Marcia L. Campbell, CPA: “That depends on how complicated the assets are. If there is one bank account, one brokerage account with ten mutual funds and a house, the accounting could take two weeks to put together. The accounting is very complicated because it shows all of the transactions that happen with the assets in a period of time. That could mean interest, dividends, stock exchanges, capital gains or losses on stocks and sale of assets. It also shows disbursements for trust administrative expenses and distributions under certain circumstances.”
What was the outcome in court?
Marcia L. Campbell, CPA: “The accountings are normally reviewed by probate attorneys who write up a list of questions before the judge sees the files. The questions are posted on the court’s website and the attorneys for the trustee will try to answer the question before the court hearing. It also gives the opposing attorney the time to review that accounting and to ask his own questions about the transactions and who the money or assets went to.”
What should other attorneys who are in similar litigation know about your services and your experience in this situation?
Marcia L. Campbell, CPA: “I prepare the accountings according to the probate code which is required. I put as much information as possible on each transaction to eliminate as many questions as possible. Lastly, the accountings need to balance before they get submitted to the court and mine always do. I do the accountings the way the court wants them done.”
Was the family able to reconcile or were they divided by the actions of the trustee and any feelings of resentment?
Marcia L. Campbell, CPA: “Normally, by the time the family gets to court, the family bonds have been broken and they rarely get back together again.”
*The names of the family members have been changed to protect the identities of the clients.