Page 71 - Successor Trustee Handbook

Warning: Be very careful when making loans from the Trust, even if they are to be
considered an “advance” against future distributions. The Trust document must permit loans
and typically will specify what the terms of any loans are to be, such as interest rate, length
of payments and security (sometimes there is just a “reasonableness” requirement that is at
the discretion of the Trustee). Any loans should definitely be documented by notes signed by
the recipients. No loans should be made without consulting the attorney, to determine
whether the funds should instead be kept in reserve for future expenses and taxes. Making
loans to one beneficiary but not to another, or in different amounts, may place you, the
Trustee, in a position of possible conflict. Because of the tremendous liability you, the
Trustee, may have, if loans are inappropriately made, you should definitely see your attorney
before making any loans to beneficiaries (or any other parties).

Also, here are a few words of caution about your Trustee fees. You may or may not be
entitled to compensation for acting as Trustee, depending on the terms of the Trust
document. The amount of Trustee fees you may take may also be limited by the Trust
document or state law. If you do get paid Trustee fees, these will be taxable income to you.
If you are also a beneficiary, your other distributions from the Trust may not be taxable
income to you. Therefore, you should consult with a CPA to determine whether or not you
wish to take your Trustee fees, as you are not required to do so. The bulk of your Trustee fees
should usually be paid at the end of the Trust administration. Your fees may not be
excessive and must be reasonably related to the nature of and amount of work you
performed. You should consult an attorney regarding the proper amount of your fees and
timing of their payment.

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