A person or entity in Connecticut that is given authority to hold and manage assets or property for the benefit of a third party, called a beneficiary, is called a trustee. Trustees are parties who hold assets in trust until the conditions required for distribution are fulfilled.
A trustee may be a person or it can also be an institution, for example, a bank, professional organization, or trust company. Trustees can be used in estate planning, bankruptcy, investments, and organizing the assets of a charity.
Trustees have several duties and obligations to the trustor, or trust creator, as well as the beneficiaries of the trust. A trustee manages investments, pays the bills of the trust, and insures the trust property. They are also responsible for paying the trust’s federal income taxes.
Trustees are also accountable for creating investment strategies, managing investments, paying the trust’s bills, and insuring any property it owns. Ultimately, a trustee is responsible for paying the federal income tax on behalf of the trust. Any income earned by the trust that surpasses the value of its distributions to beneficiaries is usually subject to income tax.
Should My Attorney Act as a Trustee in Connecticut?
In Connecticut, a trustor should consider some important issues before they ask their attorney to be their trustee. Although this arrangement can seem like it would be convenient, it can also create several types of issues for the lawyer.
For example, there are certain ethical risks that a lawyer who is appointed as a trustee can experience. In addition, the compensation for the work the lawyer will get for managing the trust can be limited if they both drafted the trust as well as act as the trustee.
A lawyer may determine that, for themselves, it may not be profitable for them to be the trustee because of the potential limits on their compensation. This is because, for the lawyer, they may be doing more work for lower fees than they would normally charge.
When someone is thinking of appointing an attorney as their trustee, it is also important for them to weigh the risks associated with making that decision. It can be more beneficial to seek out an experienced trustee who is not also serving as an attorney.
A Connecticut lawyer will be able to explain how trusts work, how an attorney as a trustee may be compensated, as well as the benefits and risks of appointing an attorney as a trustee.
What Potential Conflicts Arise When an Attorney Acts as a Trustee in Connecticut?
In Connecticut, there can be potential conflicts that arise when a lawyer acts as a trustee, which can include those discussed below.
The Duty of Prudence
Trustees are required to exercise due care when they make investment decisions. They must also diversify investments in order to minimize risks. In situations where an attorney acts as a trustee and broker for a trust portfolio, they can risk violating securities laws.
The Duty of Loyalty
All trustees have to act in the best interests of the trust beneficiaries and not in their own best interests. This can cause issues if there is a conflict between the role of trustee and lawyer or if a dispute arises among the beneficiaries.
The Subsidiary Duties
There may also be other responsibilities of a trustee, such as keeping accurate records, avoiding self-dealing transactions, and informing trustee beneficiaries of their rights. When an individual serves as both a trustee and as an attorney, they should be aware of possible conflicts and issues that can arise in order to avoid a breach of fiduciary duties.
In Connecticut, if I Appoint My Attorney as My Trustee, Do They Have To Accept?
When someone creates a trust in Connecticut, appointing the trustee is one of the most important decisions they make. Trustees must manage and distribute the trust assets according to its terms.
If a trust creator is considering appointing their attorney as the trustee, their attorney may not be willing to accept the position. A trustee can be appointed by either the trustor or the court.
Once appointed, however, they have to voluntarily accept the position. After the trustee is appointed, they cannot resign unless they have consent from all of the beneficiaries or permission from the court.
There are numerous important reasons why a lawyer may not want to accept an appointment as a trustee, which are discussed below.
Obligations to The Client
One reason a lawyer may not accept a trustee appointment is due to their obligations to their clients. Lawyers have to fulfill attorney ethics requirements, such as providing their clients with competent advice and representation.
Serving as trustee can require a lot of time and attention. This can make it challenging for an attorney to fulfill the obligations they have to both the trust and their client.
Limited Compensation
A lawyer may not be willing to accept a trustee appointment due to the fact that their compensation can be limited. In most cases, a trustee is paid for the services that they provide.
The fee for a trustee, however, is usually lower than the fee a lawyer would charge when providing legal services. In addition, a trustee may have to pay for certain expenses related to administering the trust out of their own pocket.
Potential Liability
Lawyers will often decline appointments as trustees due to the potential for liability they may face. A lawyer may be held liable for damages or losses that result from their conduct or inaction as the trustee. Because of this, the lawyer may not deem it worth the risk to accept the trustee appointment.
To find out more information about why a lawyer may not be willing to accept an appointment as a trustee, it can be helpful to schedule a Connecticut lawyer consultation.
Should I Hire Another Lawyer if I Wish To Appoint an Attorney as My Trustee in Connecticut?
There are a variety of considerations if you are thinking about appointing your attorney as your trustee. In order to protect the interests of everyone involved in the trust, it is essential to review the potential benefits and risks with a Connecticut estate lawyer.
It may be helpful to hire one lawyer as a trustee and another to provide legal services. When one attorney is serving only as a trustee, they may be able to better serve the trust and enforce its terms than an attorney who is a family lawyer or already on retainer for you for other legal issues. When the same attorney is filling more than one role, it makes conflicts of interest more likely to arise.
For example, a trustee may be required to make a decision that would benefit themselves or their families, which can cause a conflict of interest to arise. An estate lawyer will be able to draft a clearly written and valid trust that helps avoid future disputes. Estate lawyers can also help resolve any disputes between the trustee and the beneficiaries.
By considering potential future issues and taking precautions at the beginning, you can help make sure your trust operates efficiently and smoothly. Using LegalMatch, you can find a Connecticut estate lawyer in your area who can help you create your trust, serve as a trustee, or resolve an already ongoing dispute.
In as little as 15 minutes, you can complete the no cost LegalMatch attorney matching services on the website and receive responses from licensed and prescreened Connecticut lawyers who can help. These attorney responses will include information about each lawyer’s background, education, fees, and reviews from their prior clients.
