The language of a revocable trust, living trust, or irrevocable trust, is very important.
It is the “rule book” for the trustee or trustees.
If you misread or misunderstand what the settlor (trust creator) wanted or if you, as the trustee, do something outside of the terms of the trust then you may be personally liable to the beneficiaries or the trust.
It is esential, therefore, that trustees read the trust instrument and then sit down and make a list of all the things you believe you are required or which are prohibited by the trust. Be sure that you know who the current trustees are and any future or remainder trustees. For example, many trusts will say who gets the funds if a trust beneficiary dies. If a trust doesn't say, then the law may provide the answer.
Review this list and any other questions you have with a professional so you have the best chance of keeping yourself from getting sued and following the wishes of the settlor. Also check with the trust creator, or with the executor if the settlor has died, to see if there are any memos or other instruments to help you to interpret the document. Later we will see that Pennsylvania trustees also have certian duties regarding investment or trust assets. These legal duties can again be modified by trust language-so be aware. Being careful and well informed at the start and following the trust accounting, investment, and distribution rules should protect you without the need for regular consultation with legal counsel.
See all ten of our articles on How To Avoid The Most Common Mistakes Trustees Make:
Avoiding Trustee Mistakes No. 1: Trustees Failing To Understand The Trust Language
Avoiding Trustee Mistakes No. 2: Trustees In Trouble Making Early Distributions
Avoiding Trustee Mistakes No. 3: Trustees Failing To Follow The Prudent Investor Rule
Avoiding Trustee Mistakes No. 4: Trustees Failing To Follow The Uniform Trust Act
Avoiding Trustee Mistakes No. 5: Trustees Failing To Follow The Principle And Income Act
Avoiding Trustee Mistakes No. 6: Trustees Failing To Communicate Properly
Avoiding Trustee Mistakes No. 7: Failing To Properly Reform, Amend, Or Terminate
Avoiding Trustee Mistakes No. 8: Failing To File Tax Returns Or To Seek Professional Assistance
Avoiding Trustee Mistakes No. 9: Failing To Understand The Role Of Multiple Trustees
Avoiding Trustee Mistakes No. 10: Trustees Failing To Do The Job
David M. Frees III
Call David Frees for a trustee consultation to avoid liability as a trustee of a Pennsylvania trust. We have offices in Malvern, Phoenixville, and West Chester and we serve the Main Line, Exton, Chester County and surrounding counties.