Jul 1, 2010 12:00 PM

Take steps while the grantor is competent to establish clear guidelines on dealing with issues that will arise if the grantor becomes mentally incapacitated

By Eric L. Maassen & Gregory M. Monday

It can be difficult on a personal level to watch a client, whom you may have known for years, begin to lose his mental capacity. But if that client is the settlor of a revocable trust of which you are a trustee, the settlor's incompetence can also put you in a precarious legal position.

In most states, so long as the settlor lives and is mentally competent, the trustee owes all duties solely to the settlor. But what if the settlor becomes mentally incompetent? In that situation, some states' laws require the trustee to exercise his duties for the benefit of the remainder beneficiaries as well. In many states, the law is as yet unsettled, so it's not clear to whom the trustee owes the primary duty as between the settlor and the remainder beneficiaries. The result can be a no-win situation in which the trustee faces potential liability claims whatever he does.

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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

2011 Trust Glossary

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50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

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