The Perils of Administering a Trust in Florida
By: Barry E. Haimo, Esq.
January 20, 2015
If a loved one or close friend asks you to serve as administrator for their trust, chances are good that you’re going to say yes. After all, they are trusting you with an estate that it took them a lifetime to build and will likely be used to provide for everyone that they love – that’s a big vote of confidence. On the surface, administering a trust seems like a pretty easy thing to do. All you have to do is ensure the money gets where it needs to go when it needs to get there, right?
Unfortunately, as with all things in life, it’s not quite that simple. There are many things that can go wrong when you attempt to serve as a trustee without experience. Worse, as Randall discovered the hard way, if you make a mistake, you can be held personally responsible and legally liable.
Administering a Trust Isn’t for Everybody
Randall definitely didn’t know what he was getting into when he agreed to serve as trusteefor his best friend Michael’s trust. First off, neither of them ever really expected him to have to do it. Both were young heirs to large fortunes, and Michael was only creating the trust at the urging of his father – he just needed someone to designate.
But when he suddenly died in a tragic skiing accident, Randall was shocked to find himself responsible for a large portion of his deceased friend’s assets. Everyone told Randall that he should do the smart thing and step down so someone more qualified could do the job, but he was determined to show that he had what it took. That he could hold down a “real job.”
For a while, his plan worked. He did his homework and read the trust document carefully so he understood his responsibilities. He followed the directions closely, making sure to schedule automatic payments to all of the listed beneficiaries so everyone received what they were entitled to in a timely fashion. He even had someone send him a copy of the Florida Trust Code, though he never got around to looking at it.
Family members and beneficiaries were pleasantly surprised at his competence and congratulated him on doing such a good job. But you know there’s a catch coming, so let’s just skip ahead.
Everything was going well until some of the beneficiaries caught wind of the compensation that Randall was taking from the trust for himself. The average for our state is just over $50,000 a year. Randall had given himself a six-figure salary.
Why did he do this? Because despite his research, he just didn’t know better. It had never occurred to him to look up what he was supposed to be making, and $100,000 is what he felt was fair. In fact, when several beneficiaries complained, he fought back and showed them how much time he was putting in to prove that he deserved that salary.
Needless to say, it didn’t fly, and Randall was soon facing not only the loss of his job but a lawsuit. He was horrified at the process and the result, because it was something he never experienced before.
In the end, both sides were able to resolve the dispute and move forward, but relationships were damaged and everyone ended up spending a lot of precious time and money on something that could have been avoided if Randall simply understood what he was doing from the beginning.
What Randall Should Have Done
The people who were telling Randall to step down and let someone else do the job were wrong. He was perfectly capable of doing it – as he proved. But what he should have done was talk to a attorney at the beginning so someone could clearly explain his duties and responsibilities and ensure that something seemingly innocuous – like how much money he should make – wasn’t overlooked.
Trust administration attorneys are happy to handle the job if they need to, but they can also offer advice and guidance to help less experienced trustees find their way. Don’t let a need to prove your worth by doing it all yourself get you into trouble – if you’re worried about administering a trust or serving as a personal representative of an estate, talk to someone with an in-depth knowledge about what you need to do.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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