Trustees are chosen to protect personal or business assets and act in the best interests of a beneficiary (or beneficiaries). Trustees can be private individuals with some relationship to the beneficiaries, but in many cases, trustees are attorneys who specialize in trusts, probate, or real estate.
Whether your job is to care for a large trust, oversee a property or other physical assets, sit on the board of a foundation, or manage a family trust, you have major responsibilities.
As you carry out your duty to protect and serve the interests of the beneficiaries, and sometimes other parties, you must ensure that you, too, are protected if you are sued as a result of your actions as a trustee.
Trustees often find themselves at the center of ongoing conflicts, especially in family trust situations. You may feel as though you are under constant scrutiny from all sides, despite your best efforts to work in good faith for the beneficiaries.
Any number of disagreements and complaints can result in you being sued. The only way to protect your personal assets is with trustee insurance.
Trustees act as fiduciaries for their beneficiaries. Fiduciary duty means that you have an obligation to act in the best interests of the beneficiary. At the same time, you are likely expected to deal with challenging accounting, financial, and real estate issues.
Trustees can expect to be heavily scrutinized by the beneficiaries, other family members, and even third parties. Whether you are entrusted with a small family trust or a multi-million dollar estate, you can be sued for a variety of reasons, including the following:
Even basic disputes can be extremely costly. In cases of family trusts, lawsuits can carry on for years as family tensions contribute to and are often the cause of disputes.
Because trustees can be held accountable for the decisions they make, trustee insurance protects you and your personal assets when you are sued as a result of your actions as a trustee.
In general, professional liability insurance provides protection for you if a client sues you for negligence or other wrongdoing related to your work. Professional liability policies provide coverage for:
Your trustee insurance should cover:
The coverage limits of your trustee insurance policy (some can have limits of $10 million or more) must be adequate for the size and structure of the trust.
Most trustee insurance policies are written on a claims-made or claims-made and reported basis:
Every trust situation is highly complex, and you need to evaluate your coverage needs with an insurance agent. Be sure to talk with your agent about coverage for defending against accusations of intentional conduct, fraud, and criminal activity, as well as unintentional misappropriation or misallocation of funds.
If you’re an attorney, carefully evaluate your attorney malpractice coverage to determine if that policy covers you when you carry out duties as a trustee (if not, you need a standalone trustee insurance policy).
The cost of a trustee professional liability insurance policy depends on:
Your level of experience as a trustee and the depth of your role will shape the coverage you need and how much it will cost.
Trustee insurance is not something you can buy over the phone or online. It is as complex and important as the trust itself, and you need someone in your corner who can help.
It’s important to work with an independent agent who can find insurance companies that specialize in covering your trustee professional liability risks, and sell trustee insurance specifically designed for your needs.
An independent agent can help you find the right policy and can help you assess your options.