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Anybody who knows me knows that I am a huge true crime fan.
My obsession started a few years ago when I began commuting from my home in New Hampshire to my former job close to Boston. To keep myself entertained on the ride, I started listening to various podcasts. I got hooked on the true crime podcasts, even though I’m super squeamish and have trouble listening to all the gory details. Most of the podcasts I listen to focus on one case per episode, so I get especially excited when I find a podcast that does a season-long deep dive into one case. One such podcast is CounterClock, investigated and hosted by Delia D’Ambra.
Season 3 of CounterClock tells the story of the murdered Pelley family, with the main suspect being their seventeen-year-old son, Jeff. As you can imagine, a true-crime podcast is not where you’d typically expect to run into an estate planning issue, but it happens nonetheless in Episode 8 of Season 3. The details of the Pelleys’ actual estate plan are understandably sketchy, but Delia outlines the basics, stating that there was an executor of the Pelleys’ Wills who was responsible for “allocating and investing insurance proceeds” and who could not pay out funds until each of the surviving children turned 23 years old. In need of money, however, Jeff continually sought to have his portion distributed early, and eventually fabricated a medical bill to try and force an earlier distribution from the Trust. The Trustee saw through the deception, however, and Jeff ended up on probation after pleading guilty to wire fraud charges.
Though the episode discussed Wills and Executors, it seems to me that what Delia was actually describing was a Trust for the children funded by the Pelleys’ life insurance proceeds. From what I can tell, the terms of the Trust would require that the Trustee retain and grow the funds until each of the children turned 23. There also seems to be an exception allowing the Trustee to pay certain types of expenses (like medical bills) before the children turn 23 if necessary, hence the reason for Jeff’s scheme. A Trust with these types of provisions is rather typical for a family with younger children, as it ensures the children have some resources available for necessities while they are young but waits to give them larger sums of money until they have a more highly developed sense of financial responsibility. For more information on Family Trusts, see our Five Trusts Report.
What the story brought to my mind, however, is a question I commonly get from clients: How do I know that my wishes will be followed after I’m gone?
One of the main reasons to use a Trust is to ensure that your wishes cannot be altered or ignored after your passing. But how can you be confident that your wishes will be carried out? That’s where your Trustee comes in. Your Trust will have instructions as to how your assets will be distributed after your death, and your Trustee will be responsible for making sure those wishes are accomplished. As in Jeff Pelley’s case, your Trustee cannot override your wishes to distribute money early and cannot make payments when a beneficiary makes a fraudulent claim. But what stops them?
First of all, it should be your Trustee themselves who ensures that your wishes are carried out! As the very name implies, TRUST is a hugely important aspect of choosing your Trustee. It is imperative when naming a Trustee to choose someone you can rely on to follow your wishes, even if that person might have made different choices than you did. I always recommend telling your Trustee that you’ve chosen them to fulfill that role and to discuss exactly what that job will entail. That way, nothing will come as a surprise and you will both feel more comfortable in the knowledge that the Trustee can manage their upcoming responsibilities.
Second, Trust law also puts a legal responsibility on your Trustee, called a fiduciary duty. Fiduciary duty requires that the Trustee act with the utmost good faith and loyalty in their dealings with the beneficiaries and in carrying out the terms of the Trust. The beneficiaries can always enforce their rights under the Trust, and your Trustee will be liable for breaches of their fiduciary duty. Since the Trustee owes the same duty to all of the beneficiaries of the Trust, this fiduciary duty is what prevents the Trustee from favoring one beneficiary over the other or taking Trust funds for their own use. We often limit the liability of a Trustee, meaning that the Trustee is not liable for acts that they performed in good faith and under the belief that they were in the best interests of the beneficiaries at the time. The Trustee is NOT protected, however, for a breach that resulted out of intentional wrongdoing or where the best interests of the beneficiaries were not considered. All of this is intended to make sure your wishes are carried out after you’re gone.
Wondering if a Family Trust would benefit you and your Family? Schedule a Strategic Planning Session today to find out! Or give us a call at 978-657-7437 to get started on your estate planning!