Page 48 - Successor Trustee Handbook

CHAPTER 11

YOUR LIABILITY AS TRUSTEE

You must always be conscious of the fact that you may be held personally
liable (out of your own pocket) for damages or losses to the Trust and its
beneficiaries resulting from your failure to exercise your powers properly or to
fulfill your duties as Trustee. Your liability is established under state law and
may only be restricted by the Trust document or waived by the beneficiaries
to a limited extent.

The best way to determine whether you have created or may create a liability
for yourself is to periodically review the Trustee duties and Trustee powers
listed in the preceding chapters (and in the Trust document itself). It simply
isn’t feasible to list here every single potential liability you may have as
Trustee.

You may be held liable if you do the opposite of any of the duties previously
listed (or misuse a power). This may include, but is not limited to, the
following:

Failing to maintain, conserve, and protect Trust assets.
Borrowing or investing Trust assets for your own benefit
(engaging in “self-dealing” or acting with a “conflict of
interest”).
Paying yourself excessive Trustee fees.
Failing to invest Trust assets prudently.
Failing to make distributions to beneficiaries in the time,
manner, and amounts provided for by the Trust (you basically
have one year from the Trustor’s date of death to begin making
distributions to the primary or current beneficiaries, particularly
specific gifts of cash, or report to them why this is not possible
and when they can expect to receive payment; you may be
“surcharged” for interest accruing after one year). (See the
Chapter, “Making Distributions to Beneficiaries”).
Failing to properly render accountings to the beneficiaries
(however, these accountings may be waived by the
beneficiaries; see the Chapter, “Accounting to the
Beneficiaries”).
Incurring penalties relating to erroneous or late income, gift or
estate tax returns filed by you on behalf of the Trustor and/or
the Trust (or relating to your failure to file such returns).

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