WHAT TO AVOID AS A FIDUCIARY IN COLORADO
If you’ve been named as a Trustee or Executor you are also a Fiduciary, which comes with certain responsibilities. You can find some very helpful articles on the Colorado Bar Association as to what is expected from someone like a Trustee or Executor. However, there are relatively few articles that warn you about what to avoid doing; that’s important since there are legal consequences if you make errors even if you weren’t aware of them.
Key Problem Activities:
This means you need to avoid any transactions benefit you financially. A special problem that can often arise is if you’re a fiduciary and a beneficiary to something like a Will or Trust. Look carefully at the documents and see what language (if any) deals with that issue since you have a built in conflict of interest. Consider talking over any ethical issues with an attorney since each document is drafted differently, which may provide you with certain options or set you up for trouble. Additionally, it means if you are questioned later by another beneficiary, you can note that you sought legal advice to be certain you were acting fairly and impartially. You might well need to disclose the situation with the other beneficiaries to make sure they agree and understand. Often, it’s simply better to avoid options where you could make money or otherwise benefit from being fiduciary since it’s a conflict of interest with your fellow beneficiaries.
How To Reimburse or Pay yourself
You’re typically allowed to bill for your time for Probate, but there is no set amount in Colorado that tells you what that rate is. It’s based on what is considered to be ‘reasonable’ and varies depending on the level of skill you need for the work and whatever a judge feels is fair. A rough guide is $25 – $40 per hour depending on skill level. You need to carefully record your time and what you were doing and note precisely what you were paid and when. As to expenses, keep careful track of what you’re spending, save the receipts and document your reimbursement with notes. You need to consider how much being a fiduciary is costing you in terms of time and expense in order to determine if it’s worth the trouble going through this process. Some fiduciaries who are also beneficiaries opt to just consider they’ll receive their share and not deal with the extra record keeping and potential need to disclose to other beneficiaries if it’s a significant cost to the estate.
This means really neglecting your duties or doing something a judge would view as fairly insane. The most common issue is that a fiduciary simply gets busy with the rest of their life and fails to check on the investments, for example, with disastrous consequences. Or they fail to file certain required paperwork with the court or send out money to the beneficiaries in a timely way. Also problematic is trying to do tasks the fiduciary really doesn’t know much about, which can lead to horrendous investing decisions or selling a property at the worst possible time. Luckily, most Trusts, Wills and other documents that appoint you to a Fiduciary role, provide language that allow you to get assistance from an Accountant, Attorney, CPA or others with the expertise you need. Our statutes expect you would need to do so. Within limits. There’s great case law about fiduciaries who got a bit carried away and hired 12 attorneys, so best to avoid having an army of experts unless it’s a really big or complex estate.
Failure to Disclose
You have a duty to disclose significant matters to your Beneficiaries. What’s ‘significant’? That is based on a standard of reasonableness, determined by judges if a beneficiary is unhappy. There’s no set of requirements but examples are changes in trustees, changes in compensation for a fiduciary, decisions likely to be sensitive to the beneficiaries (selling the home the siblings grew up in or a family business). When in doubt either disclose or get advice from an attorney as to whether it seems likely you should.
I’ve saved this for last because it’s not typical but it does happen. Willful misconduct means doing things like siphoning off assets because you want the money. Judges feel it should be extremely obvious that a fiduciary can’t do dishonest things. Three more subtle points though: 1) Trusts and Wills can be quite surprising in that a few might allow a trustee, for example, to use the trust if they need. It’s rare but if yours says that you might want to consult with an attorney because of the conflict of interest involved since they’re more familiar with that issue. Although it may have seemed to whoever wrote in that language thought that they were doing you a favor, they were setting you up for trouble because your duty as trustee to other beneficiaries often conflicts with your own needs. Judges look to what is reasonable under the circumstances but that’s a matter of opinion so treat this carefully. 2) Family issues can make it difficult to act as a fiduciary so sometimes a fiduciary might become so frustrated with a beneficiary that they refused to talk with them. While that might seem reasonable, there’s a duty to communicate. How much? Talk with an attorney to come up with a plan so you’re not hostage to beneficiaries who are difficult nor are you ignoring them.
Overall Points to Consider
If you are ever dragged into Court because a beneficiary feels you aren’t acting properly, remember Judges base a lot of their decision on your record keeping and whether they think you are being reasonable. So take notes of what you’re doing and why, and keep good records. If you’re not sure what is reasonable in a tricky situation or what records you need to keep, consult with an accountant or attorney and get their help as needed. The estate pays for it and you avoid stress, work you’re not comfortable with or is too much and potential legal issues. I offer free half-hour consults to help you decide if this is a situation where you need legal advice and whether I’m the best attorney to help you. Even if I can’t, I can refer you to someone who can. Email me at email@example.com or call 303-417-0697.
Julie Kreutzer has been practicing law in Colorado for 30 years and is located in Boulder, Colorado. Virtual services are available.