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144: Navigating Trustee and Executor Responsibilities: Best Practices and Pitfalls

When asked to be a family member’s trustee or executor, it’s easy to immediately say yes out of love and a sense of duty. It’s just some paperwork, right? How hard could it be? At Absolute Trust Counsel, we’ve seen the struggles trustees and executors face, particularly when they are family members. The role involves a heavy workload, significant responsibility, and the meticulous task of bookkeeping—often the most daunting part.

It’s easy to overlook these critical aspects, which is why our goal for this episode of Absolute Trust Talk is to ensure you’re fully informed. Whether you’re currently serving as a trustee or executor, planning to take on the role, or considering appointing someone yourself, this episode is not to be missed.

Time-stamped Show Notes:

0:00 Introduction

0:40 Jessica begins by explaining the nuanced differences between a trustee and an executor, clarifying the roles of executor and administrator in this context.

1:50 Common misunderstandings arise about family members appointed as trustees or executors, particularly the amount of work involved.

3:22 Jessica highlights the significant level of responsibility that trustees and executors must shoulder.

4:40 While the workload and responsibility are critical, there’s one particular challenge that stands out above the rest. Here’s what you need to know.

7:12 We conclude by encouraging all trustees and executors to take these lessons to heart, ensuring they are fully prepared for their roles.

Transcript:

Hello and welcome to Absolute Trust Talk. I’m Kirsten Howe, and this is our video podcast at Absolute Trust Counsel. I am joined here today by Jessica Colbert, one of our associates at Absolute Trust Counsel. She’s relatively new to what we call the after-death side of our practice. She’s worked on estate planning with us for years and is now learning about the after-death side. She’s a perfect person to have on this episode. We will talk about trustee and executor do’s and don’ts.

Let’s start by having Jessica explain the difference between a trustee and an executor.

A trustee is someone who is named in a trust document to administer the trust after the person who created that trust passes away. On the other hand, an executor is someone who is administering an estate, meaning that a trust did not own those assets, and that person needs to be appointed by the court.

To be clear, when we use the word executor, it also is meant to include what technically would be called an administrator. When someone has a will and names someone as their executor, they are called the executor. When someone dies without a will, and we have to do probate, they are technically called an administrator. But today, we’re just going to use the word executor, which means to include both. Whenever you’re doing a probate, whether you’re an executor or an administrator, we’re talking to you.

Thank you for getting us all speaking the same language, Jessica.

Looking at both of those roles, what do you find that your clients in those roles – What is their biggest misunderstanding?

I think it boils down to not appreciating what the job is. There are a couple of things that can cause this, but maybe the biggest one is that they don’t realize how big or hard it is.

Most of our trustees and executors are family members, not professionals. We work with some professional fiduciaries – These people do this kind of work for a living. But most of our clients are family members. This is not what they do for a living. They might be engineers, they might be artists, they might be teachers. This is not what they do every day, so they don’t know how to do it, first of all. They need a lot of help. They need a lot of coaching from us. It’s just not natural for them.

They don’t think like a trustee. They don’t think like an executor. That’s a challenge. It’s a lot. It can be a lot of work. Every case is different.

Some of these cases require a lot of work from the trustee. They take the role because they’re good family members—they’ve been named, and they are willing to do it. But then they’re smacked up the side of the head with, “Oh my gosh, this is a lot of work!”

The other thing that they don’t necessarily appreciate is that they’ve got responsibility. Once they take the job, they are a fiduciary. What that means is that it’s a word that you probably hear a lot if you have a financial advisor or you’ve talked to a financial advisor, but the word fiduciary means that you put the interests of another ahead of your own interests. In this context, you are putting the beneficiary’s interests ahead of your own interests.

That means you have to do the job. You don’t get to decide not to do it. If you’ve taken the job, you have to do it because you are responsible to these beneficiaries. That can be a challenge because, as I said, our trustees are mostly family members, and they have another job, a day job, and they are used to having Saturday and Sunday off. Well, if you take on the job of trustee, when will you do it? Your boss will not be happy if you do it while you’re supposed to do your day job. So, it can be a challenge.

I think one particular aspect of this job tends to be the most challenging. Jessica, do you want to talk about that for a bit?

Yes, I know exactly what you’re talking about. It is recordkeeping. The executor or the trustee has to keep very careful records. They must stay very organized and keep on top of everything they’re doing. They must keep very careful financial records of everything coming in or out of the trust or the estate. And they need to keep track of the time they spend serving in that role.

Yeah, that’s exactly right. It’s the aspect of our work with our clients, who are trustees and executors, that’s the most challenging for us. In the end, before the executor is relieved of their duties and before the trustee distributes all the money to the beneficiaries and steps down, they’ve got to produce an accounting for the other beneficiaries, and it has to show every single thing that has happened since our decedent passed away.

That’s just not the way most people think—that every single thing has to be accounted for. So, it’s a challenge. We find that we ask for things, we give them a list—“This is what we need to do your accounting,” for example—and they come back with maybe five of the nine things on the list. We have to say, “No, we still need this,” and they come back with it, but it’s incomplete.

We need all the statements, and they send us six months’ worth when we need 13 months’ worth. So it’s hard; we understand that because we know these are not professionals. They’re used to something else.

But the bottom-line advice here is you’ve got to do the job, and you really have to keep good records and keep them current.

One of the challenges that our clients tend to have is they come up to a deadline and they’ve got to produce all this stuff. They’ve got to put together an accounting, but they last touched it three months ago. Now they’ve got to go back and redo three months’ worth of transactions. Don’t do it that way. Keep your records current, do it every day, write something down every day, and it’s so much easier.

Okay, Jessica, anything you want to add to that conversation?

No, your advice to keep it current is great.

Well, hopefully, there are trustees and executors out there listening, and they will take that to heart. So, thank you all for listening. I hope you learned something. I hope you were entertained at least a little bit. And I look forward to connecting with you next time.

Resources Related to This Episode:

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