If you believe the old adage, “Ignorance is bliss,” think again. What you don’t know truly can hurt you, especially if you are a family fiduciary, i.e. a conservator, trustee, representative payee, agent for healthcare, or executor of an estate. Case in point:
Not long ago my brother, Patrick, knowing of my vocation as a professional fiduciary, asked me about a request he had received from a friend. The friend asked Patrick to be the trustee for her Special Needs Trust. She explained that his role would be minimal—basically he just needed to give her the money from the trust, and stay out of her way. Wanting to help, to serve a friend, he asked me for my opinion on whether or not he accept this role.
I explained to him the significant responsibility and liability he would be taking on, if he were to become the trustee of this Special Needs Trust. “Patrick, do you realize that Special Needs Trusts exist, in part, for the purpose of protecting assets so that people can qualify for and receive public benefits? And, if you, as trustee, pay for things you shouldn’t, or give money directly to the beneficiary, and they lose those benefits, are disqualified from receiving those benefits, you could be personally liable for all the lost benefits?” Then I added, “Pat, don’t walk, RUN from this request.”
His face blanched when he realized how much he didn’t know, and what a minefield he had almost entered. The role was bigger and more dangerous than he ever imagined.
He stepped back from the danger zone. “No way do I want to take this on,” he said, “but I want to help my friend. What can I do? She has no one else in the world to assist.”
“What she needs,” I said, “is a private professional fiduciary that lives in her area. Yes, it will cost her some money. Yes, she will be irritated with you for turning her down. Yes, this is the right thing to do.”
To his credit, he had the difficult conversation with his friend. Yes, she was irritated with him. Yes, she did hire a private professional fiduciary in her area. Yes, the matter is being handled correctly. Yes, my brother has escaped the minefield. And yes, they are still friends.
But what if you are already acting as a family fiduciary? What can you do to protect yourself? Here are some tips if you are appointed to or acting in one of these important roles, maybe for a family member, maybe for a friend:
- Seek good legal advice. Retain and have a working relationship with an attorney who specializes in what you are dealing with. A great criminal litigation attorney is not the right choice if you are the trustee for your parents’ trust. The attorney’s fees should be paid from the estate, not from your own pocket. Don’t pester the attorney with every little detail and decision, but counsel with the attorney to get the guidance and help you need. The attorney will help protect you from the liability you face in this role.
- Get educated. Read books and articles on the topic. Visit the website for your county’s Superior Court. Many courts have information readily available. Search the internet for reliable information from reputable resources.
- Keep accurate, precise, detailed financial records, including all bank and brokerage statements. The tool you use, whether on paper or on the computer, is less important than simply doing it. Transactions should include date, bank account name/number, check number, payee/payor, amount, a category (Utilities, Mortgage, Medicine, Groceries, Home Repair, Attorney Fees, etc.), and, if needed, an explanatory note or memo. Keep or scan receipts.
- NEVER, NEVER, NEVER co-mingle funds. This means that if you are the conservator for your mother, you maintain a separate bank account for ALL financial transactions of the conservatorship. Don’t pay for your own, personal items from the conservatorship account, and don’t pay for conservatorship expenses from your personal bank account. If you are a trustee, you maintain a separate account for the trust.
- Keep notes. Document your decisions.
- Be humble and teachable. Acknowledge you don’t know everything, and ask for help, especially from your attorney.
- Know what the law and the court expect of you, and then do it.
- If you are a conservator, read The Handbook for Conservators, and follow the advice and direction it contains.
If this list overwhelms you, then you might want to reconsider the role you have accepted, and see an attorney for help in resigning. It is far better to focus on being a wonderful son or a dutiful friend, and filling that role well, as Patrick learned, than making well-intentioned mistakes which may cost your family member far more than what would have been paid in fees to a professional fiduciary. We can’t be all things to all people, but, as David O. McKay once observed, “What e’er thou art, act well thy part.”