Webinar Replay

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🎯 Webinar Overview

This comprehensive webinar focused on the practical and legal responsibilities of trustees, especially individual trustees who now manage over 80% of new trusts. Experts Dave Long and Bill Waller from the Private Trust Consortium (PTC) led an engaging and cautionary discussion packed with real-world litigation stories, practical advice, and key considerations for anyone serving as or advising a trustee.

The session emphasized the critical role of education, professional support, and risk mitigation, including insurance, for trustees. The program is CE-eligible and aimed at financial planners, attorneys, CPAs, and laypersons involved in trust administration.

🧭 Key Takeaways

1. Core Trustee Duties

• Fiduciary Duty: The highest legal standard requiring actions solely in the best interests of beneficiaries.
• Loyalty and Impartiality: No self-dealing; trustees must treat all beneficiaries equitably.
• Prudent Investor Rule: Trustees must manage assets as a prudent investor would—considering diversification and overall strategy.
  • Resource: Uniform Prudent Investor Act
  • Resource: Uniform Trust Code (UTC)

2. Legal Framework

• State Law Governs Trusts: Duties and permissions vary by jurisdiction. Trustees must consult legal advisors in their state.
• Agency Law Risk: Advisors (attorneys, CPAs, investment professionals) may owe duties not just to trustees, but also directly to beneficiaries.
• Attorney-Client Privilege Exception: Some states (e.g., Arizona) allow beneficiaries access to trustee-legal counsel communications (e.g., In re Kipnis case).

3. Common Pitfalls and Litigation Risks

• Misunderstanding fiduciary accounting (e.g., allocating sale proceeds incorrectly).
• Improper asset distributions (e.g., giving unequal assets like stocks to one heir, bonds to another).
• Self-dealing (e.g., hiring one's own firm or family without proper documentation and waivers).
• Disproportionate distributions can trigger breach claims, even if beneficiaries request them.
• Disregarding the "duty to inform and report" can undermine trust privacy intentions.

4. Risk Mitigation Tools

• Onboarding Report: Professional trust review before accepting the trustee role.
• Written Investment Policy Statement (IPS): Sets rules and protects both trustee and advisor.
• Timely Notices: Mandatory disclosures (e.g., 60 days from appointment) help reduce liability.
• Use of Statutory Tools:
  • Report with shortened statute of limitations.
  • Notice of Proposed Action (under Uniform Principal and Income Act).

5. Directed Trustees

• Growing trend where investment authority is given to a separate advisor (the "director").
• Trustee duties are reduced, but not eliminated—still liable if acting in bad faith or with reckless indifference.
• Directed trust language must be explicit and invoke statutory protections.

🛡️ Trustee Liability Insurance

• Critical Need: Individual trustees often lack protection. Traditional E&O or umbrella policies don’t apply.
• Chubb Partnership: The Private Trust Consortium offers access to affordable liability coverage underwritten specifically for each trust.
• Statutory Support: The UTC gives trustees express authority to purchase such insurance using trust assets.

📦 Resources from the Private Trust Consortium

• Back-Office Support: Trust accounting, distributions, compliance notices.
• Training & Certification: Programs for both professionals and lay trustees.
• Membership Cost:
  • $149/year for individuals
  • $249/year for professionals
  • Includes access to training, support, and liability insurance options.

🔗 Learn more: https://private-trust.org (email: dlong@private-trust.org | phone: 480-674-3050)

🧠 Final Thoughts & Best Practices

• Read and understand the trust document before accepting any role.
• Never act without a well-informed team (legal, tax, and investment professionals).
• Document all actions and decisions.
• Consider proactive reporting to beneficiaries as both defense and offense.
• If you're a financial advisor, be cautious when serving as a trustee or using third-party managers—ensure oversight and documentation.

📎 Bonus Resources

• Executor Poem by Edgar Guest (on the bittersweet experience of estate administration):
  https://www.rlcpa.com/resources/the-executor-poem-edgar-guest