The perils of naming a family member as a trustee

Pennsylvania parents want to do all they can to make sure their children’s trust is well administered and that their children will successfully inherit the assets in the trust. Some adults may decide they cannot trust anyone but family to be a trustee, and put one of their own siblings in charge of the trust. However, this actually can be a bad idea and invite more trouble than it is worth.

According to a piece run on CNBC.com, a parent’s sibling might seem like the best choice as a trustee, as the person is not only a family member, but the sibling may even the most qualified of the people the parent knows. Unfortunately, a trustee has responsibilities to the trust that might fray a loving familial relationship. Sometimes problems arise between children, with one or more believing they are entitled to more assets than the trust allows. Since a trustee is obligated to carry out the terms of the trust, this can put the aunt or uncle in the position of refusing a niece or nephew’s wishes.

An article run by Forbes describes additional problems that can come up with naming family members as trustees. In some instances, older family members may name a younger family member as a successor trustee in case an older trustee passes. However, if a younger trustee co-administrates a trust with an older family member, there could be problems if one of the two trustees starts abusing the trust, such as depleting the trust of money that was supposed to remain in the trust for a later time.

Since a trustee is held to a fiduciary standard, in the event a trust is abused or depleted by an unscrupulous co-trustee, it can open up both trustees to litigation. Family members, such as the children of the older trustee, or anyone was that was supposed to benefit from the trust, may sue the trustees for the amount they were to inherit. Also, as a fiduciary, a young family member may end up in the position of having to sue other family members to preserve the best interests of the trust.

In short, while inviting a family member to become a trustee seems like a wise move to ensure an inheritance goes through, it also opens the door for a number of personal and legal conflicts, as well as places family members into positions where they have to contest the desires of other members of the family, perhaps even legally.

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