This post is the first in a series of posts that suggest various approaches for protecting one’s estate plan from the illicit conduct of successor trustees, family members and others, in order to ensure that the estate plan will be implemented as intended.
As a trust and estate attorney, I frequently receive phone calls from beneficiaries whose parents’ estate plans have gone awry. The following scenario is typical.
Mom and Dad have several children. One of the parents dies, and the other parent gets on in years. The surviving parent comes to rely on one child more than the others. Perhaps that child has more financial experience than the others. Perhaps he or she is the primary caregiver. Perhaps he or she is simply the child who lives closest geographically. Whatever the reason, that child is named as the successor trustee in the revocable trust.
Often, assets mysteriously migrate from the parent to this child, perhaps during the parent’s lifetime, perhaps after death. Sometimes this occurs with the other children’s knowledge – sometimes not. There is usually at least a cloud of suspicion. In other cases, the estate plan may actually be modified in a manner that benefits this child, again, often without the other children’s knowledge (until it is too late).
After the surviving parent dies, the successor trustee fails to provide the other beneficiaries with the information to which they are entitled, and generally treats the trust property as his own. He either walks away with the trust property or dispenses small amounts to the other beneficiaries as and when he chooses, all in blatant violation of his fiduciary duties. Sometimes the trustee acts out of ignorance – sometimes with unscrupulous motives. In some cases, a lawsuit ensues. In others, the other family members just give up and let that child get away with it, either because they lack the resources to fight, or because they don’t want to create tension in the family.
The problem of trustees ignoring their fiduciary duties and getting away with it has grown exponentially in recent decades. Historically, when a person died, all of his or her assets were subject to a court-supervised probate. In probate, it was the court’s job to make sure that all of the estate’s net assets were properly distributed to the estate’s beneficiaries. But probate was a lengthy, expensive and inconvenient process. Accordingly, revocable trusts were readily embraced when they were introduced on a large scale in the 1960s as a novel method for avoiding probate, and the Uniform Probate Code followed suit when it adopted greatly stream-lined probate procedures. Utah has adopted the Uniform Probate Code.
The combined effect of the popularity of revocable trusts and the Uniform Probate Code is that trustees and executors have unprecedented freedom to administer trusts and estates as they see fit, without being answerable to the court unless a beneficiary files an objection with the court. Unfortunately, that also means that trustees and executors have unprecedented freedom to breach their fiduciary duties with impunity because the other beneficiaries are often reluctant to commence legal action. While making the succession of a decedent’s property less burdensome may have been a worthy objective forty years ago, the pendulum has arguably swung too far in the other direction.
Of course, the scenario described above is just one example of the kinds of problems that can arise that interfere with the smooth transition of wealth from one generation to the next. There continue to be fraudsters who prey on vulnerable elder adults, just as there always have been. And there continue to be dissatisfied beneficiaries who try to upset estate plans, just as there always have been.
For a discussion of probate and revocable trusts in Utah, go to “Basic Estate Planning Information” on the home page of this website and see other blog posts on Utah probate and Utah revocable trusts on this site. For a discussion of a trustee’s fiduciary obligations in Utah, go to “Serving as Trustee” on the home page of this website.
In the next post in this series, I suggest some creative ways to protect your estate plan from financial elder abuse, that is, to protect against the possibility that a perpetrator (who may be a stranger or may be a family member) will, against your wishes, persuade you to change your estate plan and leave him a substantial portion of your estate.
In the third post, I recommend that you appoint multiple trustees who must act unanimously and who can keep an eye on each other. In the fourth post, I suggest some provisions that you might want to include in your revocable trust to hold your trustees accountable. In the fifth post, I encourage you to share with your family members as much information about your assets and your estate plan as you are comfortable sharing during your lifetime, in order to minimize the opportunity for your trustees to hide assets or information from your beneficiaries after your death. In the sixth post, I offer some cautions about making undocumented loans and gifts.
In the seventh post, I discuss will contests and trust contests and offer some suggestions on how to discourage them. In the eighth post, I offer some general advice for protecting your assets from scams and swindlers during your lifetime. And in the ninth post, I go out on a limb and suggest that some people may actually want to consider protecting their estate plan by giving substantially all of their assets away to their beneficiaries during their lifetimes.
This series addresses how to protect the dispositive provisions of an estate plan – i.e. how to protect the estate plan itself. It does not address how to protect assets from creditors. For creditor protection in Utah, go to www.utahassetprotection.org and other blog posts on Utah creditor protection on this site.
Rust Tippett is the author of this blog post.
Copyright 2014 UNLEPI, LLC, a Utah limited liability company. All Rights Reserved.
This blog post in no way creates an attorney-client relationship between the reader and either Robert S. (Rust) Tippett or Bennett Tueller Johnson & Deere, LLC. The reader should consult with his or her own estate planning attorney regarding his or her particular circumstances.