Serving as trustee for a client

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#1
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297
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26-Apr-2022 10:00pm
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Los Angeles
Hi,

I just had a client ask if our firm (very small ~2-3 employees) could serve as secondary trustee for one of our client's trusts.

Can you please provide some advice on this request?

e.g. is it a good idea?, how much would you charge?, are there liability issues? is this something you do for clients?

Also, if the client requested us to be sole trustee instead of secondary, would that change your response?

Also, can my firm serve as trustee (S-Corp), or would it be me personally serving as the trustee?


Thanks for your advice!!!!! - this is a new one for me.
 

#2
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North Carolina
Others who have been trustees will tell their stories. However, how far out of core services should a 2-3 employee firm stray? If it were me, I’d have a warm glow about a client trusting me enough to ask. There is a reality, though and it is the reality on which you must ponder.
 

#3
sjrcpa  
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Maryland
I have done this on occasion. If I'm secondary Trustee and don't do anything, I don't charge for being a Trustee. I figure my tax prep fee can cover it. In the future I may charge a nominal fee (about 1 hr of my time).
If I'm actually stuff as Trustee I charge for my time.
 

#4
JAD  
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California
Client asked me when he was 94 years old and I felt honored. He died at 96. It was one of the worst experiences of my life. Shortly after taking on the responsibility, I read an article in a CPA magazine that talked about how horrible this role is. One thing it said is that each beneficiary will hate you because he/she thinks that he/she should be trustee. This was true.

I had not done this before and the attorney said that he would guide me. I did not realize what this really meant. What it meant is that the attorney pretty much directed every step, because at every step there is liability. You are in a fiduciary position regarding the beneficiaries, and you absolutely must do everything just so. If the beneficiaries don't cooperate, the attorney has to send out a 45 day notice in advance of every decision to protect you from being sued. What a waste of time and money. Lots more examples to be had.

You have to make sure that your liability insurance covers any acts in your role as trustee. Check carefully, and make sure that you specify that you need this coverage at each renewal. You need to generate a specific report in specific court format each year to start a statute of limitations running for how long beneficiaries can sue you. If you generate the report, I don't know if you are preparing some sort of financial statement that triggers audit CPE and peer review requirements. So you have to hire someone.

I had stated up front that I wanted my billing rate, not the "standard reasonable compensation" that they put in the legal documents that winds up being some % of the value of assets. So I got my billing rate, but if I had not specified this, I would have earned much less than my billing rate. I have spoken with others who have always found this to be the case. You start out thinking that this will be pretty straight forward, and then you wind up spending time that you did not expect, and if you are limited to a % of value, then you do not realize your normal billing rate.

That's the short story. I will never do this again.
 

#5
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297
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Los Angeles
Okay! thanks for the warning.

I will definitely call my liability coverage if I decide to go through with it.
 

#6
eze  
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Grey Area, California
As a guy that has worked on several trust litigations....run.
 

#7
TheGrog  
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Virginia
Note that much of your trust obligations depends on state law. So your state may be vastly different from anybody else posting/reading this thread.
 


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