Conflict of Interest

[Sparky]

A long time client asked if I would serve as trustee to their trust. Only reason is no other family member seems to be in good enough health. I have not looked at the trust yet but it seems cut and dry; 90 year old client still lives in his home which would have to be sold at time of death.

Has anyone ever performed this service for a client? Would it be considered conflict of interest? I can deal with paper but I'm not sure I want to deal with house and personal things.

[JohnH]

Lots of risk, compensation probably not worth the effort, no way to please everybody, and almost no upside potential for any long-term relationship.

H-m-m, I wonder which of the above would caused me to be favorably inclined to do this?

[Roberts]

Has anyone ever performed this service for a client? Would it be considered conflict of interest? I can deal with paper but I'm not sure I want to deal with house and personal things.

We handle this service for about 15 clients, used to do it for about 30. We handle all of their investments and do the accounting / taxes for the trust and act as trustee or co-trustee with the client. It's never been a conflict of interest. At death the work level increases for a while but you are generally well compensated.

[JohnH]

Well, there you have it - two exactly opposite responses.

Roberts clearly speaks from experience, whereas I posted more-or-less in the abstract.

So take your pick...

[ChEAr$]

One consideration in deciding whether or not to accept the engagement would be your chances of outliving the trust.

grin

This, a general consideration and with JohnH NOT in mind. (grin

[JohnH]

I may as well be out of your mind, since I'm often out of my own.

[Black Bart]

Well-compensated.

Wish I could pick up clients like Roberts'.

My main concern generally is not conflict of interest or dealing with paper/house/personal things, but rather how to address their usual inquiry about any non-income tax work: "Is there any charge for this?"

[taxea]

We handle this service for about 15 clients, used to do it for about 30. We handle all of their investments and do the accounting / taxes for the trust and act as trustee or co-trustee with the client. It's never been a conflict of interest. At death the work level increases for a while but you are generally well compensated.

Isn't there a stated % of the estate that the trustee is entitled to as compensation? I know that several years ago the probate atty got *% of my dad's assets and am sure that there is some regulation as to how much or a limit as to how much compensation a trustee can ask for.

Have you had any problems with family members who were not happy with their inheritance?

[JoshinNC]

Is the house the only trust asset

A long time client asked if I would serve as trustee to their trust. Only reason is no other family member seems to be in good enough health. I have not looked at the trust yet but it seems cut and dry; 90 year old client still lives in his home which would have to be sold at time of death.

Has anyone ever performed this service for a client? Would it be considered conflict of interest? I can deal with paper but I'm not sure I want to deal with house and personal things.

or are there other liquid assets? Generally a trustee would be paid a % of the trust's assets (which would include the FMV of the house) out of the liquid assets. If no liquid assets than who pays you the fee/from where?

[JohnH]

"Is there any charge for this?"

I guess the answer would be:

"I charge $100 apiece to answer questions, but I try to be fair so I don't charge to answer the first question.
What's your second question?"

[Roberts]

Isn't there a stated % of the estate that the trustee is entitled to as compensation? I know that several years ago the probate atty got *% of my dad's assets and am sure that there is some regulation as to how much or a limit as to how much compensation a trustee can ask for.

Have you had any problems with family members who were not happy with their inheritance?

Yes there are standard percentages and I'm guessing they vary by state. You get a balance of the estate after death and you get a percentage of the income produced while alive (basically). If you incur special fees, you can also charge the trust for reimbursement.

We've never had anyone vocally complain about the level of their inheritance. If it's smaller than they hoped, how is it my fault? What they complain about is not getting the cash fast enough.

[JohnH]

I've seen situations where people were grateful or even overwhelmed at being remembered by the deceased, and I've also seen situations where people were very bitter because they didn't think they got their "fair share", whatever that is.

Oftentimes, the problems arise over non-cash items, such as jewelry, pictures, heirlooms, antiques (or perceived antiques), etc. Cash and cash equivalents are usually simple to distribute, but "Memory inheritances" can be the most difficult to handle wisely. Things sometimes break down over "Who Gets Grandma's Yellow Pie Plate?".

I found the following to be an extremely valuable resource when I settled an estate about a year ago. If you're experienced at this sort of thing, there's probably nothing new here for you. But if you're new at it and need some practical advice, I recommend buying their book - it was a lifesaver for me.

http://www.yellowpieplate.umn.edu/indexB.html

[Gary2]

Oftentimes, the problems arise over non-cash items, such as jewelry, pictures, heirlooms, antiques (or perceived antiques), etc. Cash and cash equivalents are usually simple to distribute, but "Memory inheritances" can be the most difficult to handle wisely. Things sometimes break down over "Who Gets Grandma's Yellow Pie Plate?".

I suppose it's possible for non-cash items to go into a trust, especially if there's significant appreciation on jewelry or collectibles that justify some sort of estate tax savings. If so, hopefully the trust documents would specify how to handle those.

But my initial reaction - possibly way off-base - was that the trust would be for income-producing properties. Thus it would be the executor of the estate who has the hard problem of distributing the personal property, while the trustee of the trust would have the somewhat easier problem of managing the income-producing properties and deciding how much to distribute to the beneficiaries. I say "somewhat easier", because it really depends on the nature of the property and how much judgment or control is put into the trustee's hands.

[taxea]

John H thanks for the yellow pie plate. Gary-trusts include all assets personal and income producing.

[newbie]

Gary-trusts include all assets personal and income producing.

Not necessarily - it would depend on how the trust is set up.