Is Being An Executor or Trustee More Dangerous Than You Think?
Yes! Even your own kids might sue you.

By: David M. Frees III JD

In many cases it might be. But, if you own your own business
you might want to pay particular attention to this case.

If you’re a business owner who wants the trustees of a trust to
keep the stock of your legacy then it’s very important to protect them
from liability so that they don’t feel compelled to sell it to
shield themselves from law suits like this one.

However, the exact rules and circumstances should be carefully
reviewed and discussed as part of your estate planning.

A review of the case is useful:

In a recent Pennsylvania case involving executor liability for investments
the Superior Court ruled in Estate of Warden, which can be found at
2010 PA Super 121 (July 9, 2010), the Pennsylvania Superior
court found in favor of trustees who failed to sell a business
predominantly because of specific language in the will to protect them.

The facts are interesting.

Under his will, Mr. Warden established a testamentary trust that was
funded with 110,000 shares of stock in his company, Superior Tube
Company, with a value of $1.5 million at the time of Mr. Warden’s
death in 1951. Superior Tube became SGI.

The trust terms provided that the trustees were not liable for any
actions taken in good faith. Does your will have this clause?

Should it?

Read on and then chat with your lawyer.

Mr. Warden expressed a preference for long-term investment performance
with respect to trust investments, and restricted the sale of the company
unless all trustees consented to the sale at a certain price. And, the trust
continued to hold the stock of the company through mergers and other
stock exchanges and name changes.

In 1987, Mr. Warden’s grandson successfully petitioned the court to be
appointed as successor trustee of the trust, to serve along with
Wachovia Bank, N.A.

No beneficiaries objected to the appointment.

Mr. Warden’s great-grandchildren, who held a 12.5% interest in the
trust income, thereafter filed objections to the trustees’ accountings
and sought to surcharge their father and Wachovia Bank as co-trustees.

The other beneficiaries, apparently satisfied with the investments,
did not file objections.

At the time the beneficiaries filed the suit, the value of the SGI stock
had increased from $1.5 million at Mr. Warden’s death to at least
$189 million.

The beneficiaries filed the suit after attending a family meeting where
they learned of an SGI operating loss of $66 million sustained from
2000 through 2003 that would result in a major reduction in their
dividend payments.

Following a 13-day trial, (imagine the legal fees on this one) the
trial court overruled the objections. They essentially ruled in favor
of the trustees. The beneficiaries appealed- more legal fees.

On appeal, the Pennsylvania Superior Court affirmed the trial court on
the grounds that:

(1) the higher standard of care for a corporate fiduciary does
not apply where the trust instrument explicitly mandates a different
standard of care such as the good faith standard;

(2) because Mr. Warden indicated a good faith standard in the trust
instrument, the trustees only breach their duty if they do not act in
good faith, which means if they intentionally acted with a
dishonest state of mind;

(3) the allegations that Wachovia failed to follow its policies, attend
SGI board meetings, review financial statements, or meet with the
co-trustee did not rise to the level of intentionally
dishonest behavior;

(4) because the trust terms required the consent of all co-trustees to the
sale of SGI stock, and did not provide a mechanism for breaking a tie
between Wachovia and the co-trustee, Wachovia
did not have a duty to compel the co-trustee to sell the SGI stock;

(5) the trustees were authorized by the trust terms to hold assets even
if they did not generate returns;

(6) a trust investment may fluctuate in value in a short-term time
period over the administration of a trust, but a short-term decline in
value is not a loss where the overall long-term performance of the
stock shows an increase in value;

(7) here, the asset increased from $1.5 million to $189 million, and
the beneficiaries’ focus on the alleged $300 million loss in value between
the 1990s and 2003 was inappropriate;

(8) the beneficiaries’ claims were barred by laches (a legal concept
designed to give people a fair time within which to bring their claims or to
be barred) because their grandmother never objected to the trustees’
actions, no other beneficiaries objected to the administration prior to 2004,
the beneficiaries did not demand an accounting until four years after
succeeding to their grandmother’s interest in the trust, and they were
aware of the high concentration of SGI stock 13 years before becoming
beneficiaries and four years after becoming beneficiaries before requesting
an accounting; therefore, the beneficiaries had an affirmative duty to inquire
and bring their claims sooner.

The bottom line?

If you Own a closely held business it might be sold upon your death.
But, if you want it to be held in a trust you’d better consider some
specific provisions to give the trustees guidance and to protect them
if they follow your rules.

For more information about estate planning, succession planning,
and exit planning for the owners of closely held and family owned
businesses, call or email me at 610-933-8069 or at dfrees@utbf.com

Attorney David M. Frees III

Thanks also to the firm of McGuire Woods Fiduciary Advisory Services and Steve
Leimberg for calling this case to our attention and for their savvy analysis.

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In just 20 Minutes You Can Have A Free Will Review and
Make Sure That Your Old Will, Trust, and Power of Attorney
Aren’t Out of Date or Invalid

Old Will May Be Better Than No Will - But if your will looks like this it may be time for an update

Unruh, Turner, Burke and Frees Offers Free Will Reviews This Fall

Have you been wondering if that old will, trust, or living will and power of attorney are still good?

Do they still work?

Are they out of date?

Have the legal changes of the last few years rendered any of them obsolete?

If you’ve been wondering, you can now put your mind at ease.  And to make it even better, you can get the answer for free and it only takes 20 minutes to find out.

Unruh, Turner, Burke and Frees is now offering a limited number of will reviews this fall.

30 have already been filled but another ten are still available to non-clients.  These will reviews are not contracted out to young lawyers; they are performed by David Frees and Douglas Kaune, partners of the Trust, Estates and Wealth Preservation Section of the firm.

Why would a firm and two very busy lawyers make this offer?

We want our clients to be sure that their documents are up to date.

We want you to have peace of mind.

And, many times when we review these documents they turn out to be fine.

In those cases, where some updates or changes are needed, you’ll always get a flat fee quote for that work and there is never any fee unless you decide to make those changes or important updates.

There are a limited number of these dates for both clients of the firm and for those who aren’t yet clients.

So, if you’re interested in more information about registering for one of our will reviews, call for a review by David Frees of Doug Kaune.

Call 610-933-8069 and mention the FALL WILL REVIEWS OFFER to get one of the twenty-minute free spots.

You can also email Lisa at info@utbf.com or lsnyder@utbf.com

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It is important to make your estate planning documents flexible. As best as possible, we try to foresee the future and address the planning possibilities. We know it is not possible to address everything now for a trust that could be in place 10, 20, 50 or 100 years from now. So we give the succeeding generations the power and authority to adapt and deal with the future circumstances. We want the tax and creditor, divorce and asset protection enhancements and benefits provided by trusts, but we do not want the trusts to become an inadvertent burden on the beneficiaries.

Two powers providing needed flexibility to a Trustee are the authorities to name either a co-trustee to act with him/her or to name his or her successor. The ability to name a co-trustee may be valuable where the named trustee is in unexpected need of professional assistance because of complexities dealing with the trust assets, the legal requirements of the trust, or in dealing with the trust beneficiaries.

The named trustee may want to stay involved as co-trustee, but they may also want the formal assistance of a professional trustee. Note that the named trustee is also typically given the power to remove the professional trustee if appropriate or necessary.

Secondly, the trustee power to name his/her successor is invaluable. Again, we do not know how long a trust will continue or if a trust will benefit succeeding generations. Therefore, we do not know that the named trustee or trustees will have the longevity or continued willingness to act. Giving the trustees the power to name a successor will help to prevent a situation where no trustee is available to act.

Take care to grant these and other powers to your trustees. You cannot predict the future so let the Trustees deal properly with the events they face in the future. If you would like to update your documents, where possible, or would like to review these and many other planning nuances that can help accommodate the future needs of your trustees and beneficiaries, please call or contact Douglas L. Kaune at 610 933 8069 or dkaune@utbf.com.

Douglas is a partner with Unruh, Turner, Burke & Frees, P.C. serving clients in Paoli, Collegeville, Royersford, Berwyn, Wayne, Pottstown, Norristown and all other towns surrounding the Firm’s three convenient office locations in Phoenixville, Malvern and West Chester.

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Many people initially look to friends and family members to act as Trustees for Trusts created under a Last Will for their children. The prevailing thought is that the family member or friend will be more invested in the lives of the children and will therefore do a great job. The clients also believe that it will be the most cost effective approach to naming a Trustee because the friend or family member may choose to take little or no compensation.

Although friends and family members might do a good job, I have experienced enough cases where that is not the case that I suggest considering the use of a Corporate Trustee. This is not to say that the family member or friend would not be well intentioned in their efforts. They almost always are. The problem is that they do not always know the best way to approach the job as trustee. They do not fully understand the investment options or the income tax considerations. They often tire of having to deal with the minutia of the job including, but not limited to, the need to field the calls from beneficiaries who want their money. These potential negatives can serve to cost the Trust more in loss than the fees saved by naming the individual trustee.

Many clients are now opting to name a Corporate Fiduciary, such as a bank or financial institution, as the Trustee. The key component to this shift is that the clients are now naming the friend or family member to act as the Trust Protector. The Trust Protector is given the power to oversee the actions of the Corporate Trustee. Most importantly, the Trust Protector is given the power to remove and replace the Corporate Trustee. This gives us something that is close to the best of both worlds, professional advice and management and family involvement.

Read our article Choosing a Trustee: Individual Trustee vs.Corporate Trustee to find out the advantages and disadvantages of either scenario so you can pick the right trustee for your trust.

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The federal estate tax has been in the news a lot this past year. Whether you like it or not it is here for at least the next couple of years.

This may seem like a silly question but do you want your estate to pay more federal estate tax or less?

If you answered less than you need to read

A Guide to Trusts: How to Find the Right Trust for You on trusts to understand that there are dozens of different kinds of trusts that can do things from save your estate from paying more taxes than you need to, to taking care of your spouse, children, or a charity when you are gone.

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There are many families blending children from multiple marriages. The children from these families often range widely in ages.

Parents I meet with often want to provide for only the younger children until they reach a certain age. Their belief is typically that the younger children have greater needs and should have the benefit of great financial assistance. When developing this plan we have to weigh the need to provide for the younger children against the desire to ultimately share the family assets equally among all of the children.

One suggestion is the Sprinkle Trust. This trust would be established under the will of the second decedent spouse. The trust, through a named trustee, would benefit only the named “younger” children until the youngest reaches an appointed age often in the early twenty’s. The trustee can pay for expenses for the named children’s health, support, maintenance and education. After the youngest child attains the appointed age, the Sprinkle Trust will then split into equal shares for each of the older and younger children. The assets after the split can either be paid outright to a child or can be maintained as a separate trust for each beneficiary.

The Sprinkle Trust is only one planning opportunity and is not one that solves the planning issues for all families. Second marriage planning can be very complex and should be reviewed with experienced planners and advisors.

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Have you ever left a meeting with a lawyer more puzzled than when you arrived?

Well, one reason is that many lawyers including “trust” and “probate” lawyers use language they are familiar with and use on a daily basis but forget that most of us do not know that language or, for that matter, anything about a particular field of law such as wills and trusts.

But confusion in communication with your lawyer will usually mean higher fees and that your trust or will might not even do exactly what you want it to.

So, we have written a guide for you to get the most out of your trust lawyer. Understanding what the lawyer is saying or what you are reading is crucial to the successful implementation of the right trust for the right purpose for you.

To get exactly what you want and what your family needs read A Guide to Lawyer Language: Understanding Trusts

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If you answered no you need to read our trust guide How to Find the Right Trust for You to see what you are missing.

• There are trusts that help you and your estate save money in taxes.
• There are trusts that help you care for a loved one with special needs.
• There are trusts that can take care of your pets when you are gone so you do not have to burden your family or friends.
• You name it and there is a trust for it.

The reason there are so many trusts are that they can do so many different useful things.  And, almost no two people want or need exactly the same trust provisions.

If you answered yes you still need to read How to Find the Right Trust for You to make sure you have the best trust or trusts set up to do exactly what you want them to do. You may also learn that there are more trusts than you realized and they have many different purposes. You may find out that you could use a trust for something you did not even know you needed or something you did not realize a trust could be used for.

Take advantage of this trust guide to start understanding what a trust can do for you.

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Lawyers, like doctors and other professionals, habitually use language that is practically impossible for many of us to understand. They use language familiar to them but sometimes forget that it may be unfamiliar to you if you do not work in their field of trust and estate law.

So how are you supposed to get what you want from a trust lawyer if you can’t understand what they are talking about or, worse yet, what if they aren’t really understanding exactly what you want in your will or trust?

All to help you, we have written a handy guide to some trust language you may hear from your lawyer or written in documents you have or have been given. With this guide you should be able to ensure you get what you want at the best possible cost.

A trust can be a valuable resource in your estate planning and asset protection. Unfortunately, a trust can also be complicated by state and federal regulations, codes, and statutes.

Un-complicate trusts.

Understand trusts.

And, get a head start on understanding your trust lawyer so you can make sure you get what you want.

Click here to read A Guide to Lawyer Language: Understanding Trusts

If you already know exactly what you want your trust to do, call 610-933-8069 for an appointment. You’ll also receive a free CD of important estate planning information and other resources before your appointment by mentioning the offer: Trust Guide if you call or email.

You can also email David Frees at dfrees@utbf.com for an appointment.

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A Trust Guide - David M. Frees III

Have you heard other people talk about trusts or have you thought about incorporating a trust into your estate plan or asset protection planning but are not sure where to start.

We have written this trust guide, How To Find the Right Trust For You, which  explains  many of the most common  trusts as a way for you to start exploring trusts and how they are created, operate, and their many useful and different purposes.

Take advantage of our expertise and learn more about trusts today to create a better, more effective and efficient estate or asset plan and save you and your heirs money.

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