A trustee is a person or entity that is given authority by a trustor to hold and manage property or assets to benefit a third party. That third party is referred to as the beneficiary.
The trustee will hold the assets in the trust until any required conditions for distribution are met. Trustees can be institutions, such as banks, or they can be individuals.
Trustees are typically used when someone creates a trust. When this happens, the trustor gives the trustee the authority to hold and manage their assets and property for the benefit of another person or entity.
Should My Attorney Act as a Trustee in Colorado?
In the State of Colorado, there are some important considerations someone should make before asking their lawyer to be their trustee. Even though the arrangement may seem convenient, it can create different types of issues for your attorney.
There are various ethical risks that an attorney who has been appointed as a trustee may experience. Additionally, the lawyer’s compensation for their work managing the trust may be limited if they drafted the trust and act as the trustee.
An attorney may make a determination that it would not be profitable for them to serve as a trustee, along with their role as an attorney, due to the compensation limits. This is because they would be doing more work for less pay.
If an individual is considering appointing a lawyer as their trustee, they should also weigh the risks before they make that decision. It may be more beneficial to find a qualified and experienced trustee who is not also serving as someone’s lawyer.
Colorado lawyers can explain how trusts work in the state, how their lawyer may be compensated, and the risks and benefits of having an attorney as their trustee.
What Potential Conflicts Arise When an Attorney Acts as a Trustee in Colorado?
There is a potential for different types of conflicts to arise when an attorney acts as a trustee in Colorado, such as:
- The Duty of Prudence: A trustee must exercise due care when they make any investment decisions as well as diversify investments in order to minimize risks.
- When a lawyer acts as a trustee and broker for a trust portfolio, there is a risk of violating securities laws.
- The Duty of Loyalty: The trustee must act in the best interests of the beneficiaries and not act in their own interests.
- This may present challenges if a conflict arises between the role of the attorney and trustee or if disputes arise among the beneficiaries.
- The Subsidiary Duties: There may also be additional responsibilities of a trustee, which can include avoiding self-dealing transactions, keeping accurate records, and informing trustee beneficiaries of their rights.
If an individual is acting as both an attorney and a trustee, it is important for them to be aware of these possible conflicts and to take steps to avoid them. When an individual understands the potential conflicts that may arise, they can protect themselves as well as the beneficiaries from a breach of fiduciary duties.
In Colorado, if I Appoint My Attorney as My Trustee, Do They Have To Accept?
In Colorado, when someone creates a trust, one of the most important decisions they may make is who will be appointed as the trustee. A trustee has the important responsibility of managing and distributing assets according to the terms of the trust.
When a trustor is thinking about appointing their lawyer as their trustee, it is possible that the lawyer will not accept the position. Trustees can be appointed by trust creators or courts.
The trustee, however, must accept the position voluntarily. Once trustees are appointed, they are not permitted to resign unless they obtain permission from the court or consent from all of the beneficiaries.
There are several important reasons why an attorney may want to decline an appointment as a trustee. These are discussed below.
Limited Compensation
One of the main reasons an attorney may not want to accept an appointment as a trustee is that their compensation might be limited. Typically, trustees are paid for the services they provide.
However, the fee that is provided to a trustee is typically lower than what an attorney would charge for providing their client with legal services. Trustees can also be held responsible for paying certain expenses related to administering the trust, which can be costly over time.
Obligations to Their Client
An attorney may decline a trustee appointment because of obligations to their client. There are attorney ethics requirements that lawyers must fulfill, including giving their clients competent representation and advice.
Being a trustee often requires a lot of attention and time, which may make it difficult for the attorney to fulfill their obligations to their clients as well as the trust.
Potential Liability
Attorneys also commonly decline trustee appointments because of the potential liability that they can face. They can be held liable for losses or damages that arise due to their inaction or conduct as a trustee. They may not perceive as it being worth the risk to accept the appointment.
What if My Lawyer Wants to Be a Trustee?
Even though there may be many reasons for a lawyer to decline a trustee appointment, there are also situations when they may want to serve as a trustee. If they have a good relationship with a client and the client believes the attorney may be a good fit for their trustee needs, the trustor can always simply ask their lawyer if they would be willing to serve as a trustee.
If the court approves it and the beneficiaries agree, the lawyer can serve as trustee. When someone is considering an appointment of their attorney as trustee of a trust, they need to review all of the pros and cons of making that decision.
The trustee plays a very important role in the administration of a trust, so it is important to choose someone who is willing and able to handle the responsibility.
Scheduling a Colorado lawyer consultation can help someone create their trust as well as determine if their attorney is a good fit for the position of trustee.
Should I Hire Another Lawyer if I Wish To Appoint an Attorney as My Trustee in Colorado?
There are numerous different issues you should consider when thinking about appointing your lawyer as your trustee. To protect the interests of all parties involved, it is very important to review the issue with a Colorado estate lawyer.
When an attorney is serving only as a trustee, they may be able to better navigate and enforce the terms of the trust than a lawyer you already have on retainer for other legal issues or your family lawyer. Conflicts of interest are much more likely to arise when the same person is filling multiple roles.
As an example, trustees may have to make decisions that can benefit themselves or their families financially, which can lead to a conflict of interest. Estate lawyers can draft clear and valid trust documents that help ensure future disputes do not arise. They can also help resolve any disputes between trustees and beneficiaries.
Considering potential future issues and taking precautions can help make sure your trust runs smoothly and efficiently. In as little as 15 minutes, you can start the free lawyer matching service provided by LegalMatch to find a Colorado estate lawyer to help you navigate the trust process.
