The Role of the Successor Trustee: What Am I Supposed to Do Now?

By

Ethan R. Okura

We have often seen this scenario:  A parent, sibling, or dear friend has finally gotten around to doing their initial estate planning. You are so happy for them. And then you find out you’ve been named as their “successor trustee.” What does that even mean? What are your responsibilities? How will you know what to do when the time comes? When exactly does that time come? What exactly is a trust in the first place? Relax. There’s an orderly process you can follow to understand your responsibilities as a successor trustee and how you can play your part to make that loved one’s transitions in and through life go smoothly.

Let’s start with, “What is a trust?” A trust is a legal agreement between the person setting up the trust, usually called the “Settlor” and the person assuming responsibility for managing the trust assets, called the “Trustee.” In the vast majority of estate plans, which involve a revocable trust—which can be cancelled or amended at any time—the person creating the trust also names herself as the initial trustee. The final group of people involved with each trust is the beneficiaries. Usually, the Settlor is also the only initial beneficiary of the trust. Then after the Settlor passes away, her spouse, children, other family members, and/or other friends and loved ones become the beneficiaries.

When the Trustee can no longer act as Trustee for himself or herself because of disability, incapacity, or death, then the Successor Trustee (or more than one “Co-Trustees”) named in the Trust document is called upon to take over.   Unfortunately, even though the Successor Trustee may be an individual in whom the Settlor had great trust and faith in being able to handle the affairs of the Trust, most Trustees have never done this before and really have no idea what to do or how to do it.   Many Settlors, as well as Trustees, may even think that the Revocable Trust will automatically take care of everything by itself, without any work involved by anyone!

The main objectives of a revocable trust based plan are:

• Distribute the Settlor’s assets to the right people, in the right amounts, at the right times and in the right manner appropriate for each of them, without the delays and expenses of Probate Court involvement.
• Manage the Settlor’s assets for him or her in the event of his or her disability or incapacity, and to manage those assets for the people who will later inherit them (until such time

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“UNDUE INFLUENCE” AND OTHER WILL PROBLEMS

By:

Ethan R. Okura

In previous columns, I have addressed the subject of financial abuse of the elderly. This usually involves outright stealing or fraud. However, there is another form of financial abuse that is subtler, harder to identify and often doesn’t show up until after the beloved family member has passed on. This type of problem is called “undue influence.”

What is “Undue Influence?”

Black’s Law Dictionary defines “undue influence” in these words: “In regard to the making of a will and other such matters, undue influence is persuasion carried to the point of overpowering the will, or such a control over the person in question as prevents him from acting intelligently, understanding, and voluntarily, and in effect destroys his, and constrains him to do what he would not have done if such control had not been exercised.”

California Probate Code Section 86 and California Welfare and Institutions Code Section 15610.70 define undue influence as “excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will and results in inequity.”

What that means in plain English is that sometimes an unscrupulous person will manipulate another person who is dependent on them or otherwise vulnerable in such a way that the unscrupulous person will benefit or profit from the fact that the other person is dependent or vulnerable. In other words, it’s when someone puts inappropriate pressure on someone else to get him or her to do something that they wouldn’t do otherwise.

Examples of Undue Influence

Although undue influence can occur while executing a contract or a real estate transaction, it most often comes up in the contesting of a last will and testament. One of the most notorious Hawai‘i cases in recent times involved the Estate of Herbert, a case that the Hawai‘i Supreme Court decided on March 17, 1999.

In this case, an elderly woman named Ms. Herbert had written a will in September of 1988, leaving all of her assets to her local church upon her death. Ms. Herbert had a 26-year-old Canadian caregiver named Hanno Soth, who assisted her with doctor visits, taking prescription medication and even managing her finances beginning in December 1989 until her death. Hanno Soth apparently had Ms. Herbert change her will in December of 1989, leaving everything — over $1 million — to him. This happened during the two-week period when Ms. Herbert’s live-in housekeeper was out of state on a vacation. Soth later fired the housekeeper, whose last day of work happened to be three days before Ms. Herbert passed away. At trial, there was even testimony that Soth had spent the night at Ms. Herbert’s home for the first time the night she died. These are very suspicious circumstances.

Friends, neighbors, the housekeeper, and Ms. Herbert’s doctors and lawyers testified that when the new will was signed, Ms. Herbert did not have sufficient mental capacity to understand what she was signing — or to even remember the next day what she had signed. The court decided that Ms. Herbert did not have the mental capacity to change her will at that time, was mistaken about what was written in it and was unduly influenced in its execution. Thus, the caregiver, Mr. Soth, did not succeed in inheriting her assets.

Another example is more recent. It involves Princess Abigail Kawananakoa (known as “Kekau”), the closest living relative to Queen Liliuokalani. The queen was Kekau’s great-aunt. There has been a legal battle brewing between Kekau’s longtime domestic partner and now-wife, Veronica Worth, and Kekau’s former attorney, James Wright. He petitioned the court, asking that Kekau, now in her 90s, be prevented from controlling her trust after she suffered a stroke. Kekau herself sent a handwritten letter to a local news outlet insisting that it was only a minor stroke and accused her attorney of mismanagement. Her estate is worth over $200 million. You can see why many people are concerned about what happens to it. The attorney claimed to be protecting Kekau from “opportunists and interlopers,” perhaps referring to Kekau’s now-spouse, Ms. Worth.

Although Kekau’s stroke was real, whether it left her incapable of managing her affairs is the question before the courts. Although she insists that she is still competent, at least two medical experts appear to have found her lacking mental capacity. Now, the three board members of the Abigail K.K. Kawananakoa Foundation — a charitable organization that is expected to inherit large sums for the benefit of Native Hawaiians upon Kekau’s death — are also attempting to intervene in the management of Kekau’s trust in order to protect the future interests of the foundation. In this case, Kekau’s former attorney, James Wright, is claiming that he worries that Worth is exercising undue influence over Kekau to benefit from her estate. Worth, on the other hand, claims that Wright is the one trying to take advantage of Kekau’s estate. The court will ultimately settle the dispute.

In these types of cases, it’s hard to know for sure whether there actually were bad actors or just people trying to look out for the elderly person’s best interests as they perceived those interests evolving. Regardless, it’s important to communicate your wishes with multiple friends and family members early, so that they know your intentions.  It’s also important to establish a good relationship with an estate planning firm that will likely be around when you might become incapacitated so that there is a clear record of your plan and whom you trust to carry out that plan for you.

© OKURA & ASSOCIATES, 2018