Like Britney Spears, you too can face fiduciary disputes – press enterprise
Last month, the Free Britney movement and Ms Spears’ request to dismiss her father as a Tory was a high-profile success. Los Angeles judge suspended Jamie Spears as conservative Britney’s estimated $ 60 million estate and has appointed a CPA as a temporary replacement to oversee her finances.
But I didn’t do anything wrong!
Mr Spears’ response to the court’s decision to fire him suggested that he did not believe he had done anything wrong.
“But Jamie believes every decision he’s made has been in his best interests,” his lawyer told CNN.
Spears’ suspension is not uncommon. If you go to a local estate court on a weekday morning, you will see one trustee after another brought before the judge for misconduct. Of course, not all of these Trustees and Conservatives are crooks. Most, in fact, probably started with the best of intentions, as Mr. Spears claims. But at one point, they got lost and made mistakes in judgment.
Most often, fiduciary responsibility relates to finances. Executors, financial advisors, lawyers, accountants, and board members typically have a fiduciary responsibility (or obligation) to their client, organization, or beneficiaries.
What is a syndicate ? He or she is responsible for managing the assets held by the trust for the benefit of a beneficiary.
Sometimes the results don’t matter
Here is the unlikely but true story of a trustee who thought he was doing the best financially for the widow of his close friend.
The trustee, who the widow asked to be trustee, claimed he was generating returns of 20% on average per year over 12 years to her benefit. The widow sued him and successfully won a $ 90 million settlement for violating his “duty of loyalty.”
If the trustee was so successful in managing the trust, why was he sued? He invested assets in trust in a young, high-growth company that he was promoting. This is commonly called self-operation and is prohibited. It didn’t matter that he brought her millions. After losing his appeal, he proclaimed that what happened to him would scare anyone into becoming a trustee, especially as a favor.
As this example suggests, regardless of the outcome, you have specific responsibilities if you perform the duties of a trustee, including not using the assets of the trust for your benefit (unless the trust authorizes it or the court does not allow you to do so). The trustee is also responsible for investing the assets of the trust in a prudent (conservative) manner (called the prudent investor rule) in order to achieve reasonable growth with minimal risk. Investing in a high risk business, like this trustee did, doesn’t follow the rules.
They should have followed the rules
Additional fiduciary rules are intended to protect trust assets and to be fair and transparent to beneficiaries. You should not mix (mix) the trust assets with yours to prevent yourself from spending those funds on yourself.
The trust or estate must have its own bank and investment accounts. You must treat the beneficiaries of the trust the same and you cannot favor one over the other (unless the trust or the court allows you to do so). You must keep accurate records, file income tax returns and report, as required by the trust or the court, to the beneficiaries.
It’s an honor if someone appoints you as a trustee or executor, but you shouldn’t be celebrating right away.
The work of a trustee, if done correctly, will not benefit you. Many trustees are unhappy with the work and the lack of appreciation. Sometimes the recipients can come across as legitimate, obnoxious, and downright unfriendly. Trustees will sometimes justify the mix of assets, self-operation and even theft because of their resentment.
If you are appointed, there are a few things you can do to make the process easier, with less exposure to liability.
How to protect yourself
Don’t go it alone.
You should be able to hire professionals in your new role at no cost to you personally. Be sure to hire an estate attorney to advise and communicate with beneficiaries, a trust CPA to prepare accounting and tax reports, and other advisors, including a fund manager, as needed.
It is better that you hire your own professionals, not those who have a relationship with the beneficiaries. Your professionals will advise you on the procedure to follow. If they are credible, they work with Trustees on a daily basis, understand the dangers, and will support and protect you.
Make sure you are paid for your time. It’s hard work, and no one should have to work for free. If the trust document doesn’t specify your compensation, talk to your lawyer and follow local probate rules.
Work pragmatically and consistently. Don’t delay and don’t delay. Have a plan. Inform beneficiaries that you are using professional services and allow your lawyer to contact them. Make the process as transparent as possible. Always get appraisals on real estate and other assets. Systematically report to beneficiaries and reasonably plan distributions to mitigate suspicion and reduce the risk of lawsuits.
If you are a trustee, read the trust document several times until you understand it, then follow it exactly. Sometimes it is not easy.
I used to be the successor trustee of a couple who did not want family members to enter their home after they passed away. They left a long list of their possessions and made it clear who should inherit each item. Many made impassioned calls to visit the house.
Family members claimed that they had been verbally promised cars, appliances and jewelry. The couple’s caretaker wanted me to âjust let him haveâ a stationary bike that wasn’t on the list.
To follow the terms of the trust, we used a “white glove” service to deliver the items to the recipients. We organized the real estate sale at another location and everyone was invited. I went to the estate sale early and bought the stationary bike for the keeper with my own funds. Fortunately, no one complained.
Although it is not easy, there is a deep sense of satisfaction in fulfilling the wishes of someone who is no longer there. Relying on the trust document will also protect you as a trustee.
Only time will tell what Mr. Spears did wrong as a trustee.
One of my favorite cartoons is about an administrator in a prison jumpsuit sitting behind bars. He told his cellmate, âI didn’t know that fiduciary meant I had to return the money. It would have been better if the imprisoned trustee had realized that it was never for him to use in the first place.
Ms. Herting is a Certified Public Accountant, Certified Business Valuation Specialist and Certified Estate Planner. Its offices are located in Los Angeles, Orange and Riverside counties.