MCLE SELF-STUDY ARTICLE RISK MITIGATION STRATEGIES FOR THE SUCCESSOR TRUSTEE

Written by Herbert A. Stroh, Esq.^* and Josh Yager, Esq., CFP ^**

I. SYNOPSIS

It is hard to be a successor trustee.⁰¹ The common preference of most settlors is to name a non-professional—typically a family member—who is trusted by the settlors and familiar with their family dynamics, desires, and goals. These non-professional successor trustees are cut from a common cloth; they are the surviving sibling, eldest child, long-serving certified public accountant (CPA), niece who went to law school, or the friendly neighbor. Rarely does the settlor consider whether their successor trustee will have the time, interest, or training to manage the complex responsibilities required of them in connection with a trust administration. Because most successor trustees are unfamiliar with the job, the risk of making a mistake and exposing oneself to personal responsibility is high.

For decades, the authors have provided advice to clients and testimony in court on matters related to the trustee’s fiduciary duties and related standards of care. We have seen many cases in which successor trustees failed to do their job either through ignorance or intention, and, as a result, suffered significant personal financial consequences. To discuss risk mitigation strategies, we first cover common complaints that are invariably included in the aggrieved beneficiaries’ petitions for relief. We then imagine "what could or should the trustee have done to preemptively mitigate these common risks?" We are hopeful that this article may serve as a road map for non-professional successor trustees as they seek to fulfill their duties of loyalty and care with excellence, and the attorneys who represent them.