Trust building: a CPA's guide to serving as a client's trustee.

• Author: Yager, Josh
• Position: Professional services

So, you're a CPA and a trustee. You said, "Yes," when your client asked, "Will you serve as my successor trustee?" We don't need to belabor why you said yes or whether you regret saying yes or if your partners are happy about your decision. What's done is done. You said, "Yes, I will be your successor trustee."

Now the settlor is dead and you are the trustee. And for that you will receive treasures in heaven ... and consternation here on earth, because the beneficiaries whom you serve likely don't yet trust or know you.

The disgruntled beneficiaries second-guess your every decision: to sell the apartment building or keep the apartment building; to buy stocks or to sell stocks; to make increase distributions to mom or to reduce distributions to mom. It doesn't matter what decisions you make--often, they believe they should have been the trustees and not you.

So, as a result, there's nothing you can do to make them happy.

Maybe it's good news that a trustee can only be found liable for breaching a duty of care that is owed to a beneficiary': A trustee cannot be removed from the office, surcharged or be forced to disgorge their compensation unless the beneficiary can prove the trustee has breached a duty of care. So, usually: No breach, no liability, no problem.

For CPAs who serve as trustees, adopting a simple governance process can help demonstrate they know what their duties of care are and have records that they've taken affirmative steps to fulfill these duties.

If there ever is a day when a disgruntled beneficiary comes calling with his or her legal representative claiming that you have breached your duties as a trustee, you will be prepared.

Our observation is that courts pay special deference to the trustee's decisions. The trustee's decisions "shall be conclusive" if the exercise of that discretionary power is made in good faith and according with the trustee's best judgment (Estate of Bixby, 55 Cal. 2d 819).

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So, this is easy: The court holds your decision as "conclusive" so long as you can prove those decisions were made in good faith and according to your best judgment--not the court's best judgment, not the beneficiary's best judgment, not the deceased settlor's best judgment--the trustee's best judgment.

Further, your decision as trustee will not be judged in hindsight, but in the light of the facts and circumstances that existed at the time you made that decision. Only when the trustee acts intentionally...