You ask for help from an attorney. You need to do three primary things to insulate yourself from lawsuits.
1. Document, document, document. Keep your receipts, statements, tax returns, and notes from meetings with financial advisors, accountants and lawyers. Do an annual report showing what you received, what you distributed, and the total you held at the end of each year. Think about offering that report to the beneficiaries even if you don’t have to – why? Because they will only have a limited time to sue you if they do not object to that report.
2. Get a Release Before you Distribute. Beneficiaries are very motivated to listen and cooperate before they receive their distributions from the estate or the trust. If you distribute first, it will be nearly impossible to persuade them to act afterward.
3. Calculate Twice Distribute Once. You may have heard the phrase “measure twice cut once” from carpenters and contractors. This phrase is intended to reduce mistakes. Frequently, Executors and Trustees are pestered by beneficiaries to make distributions quickly. If you distribute too much money, then you are in a position of having to ask each beneficiary to give part of their distribution back to you. You can avoid this awkward and difficult situation by calculating more than once. Here’s another tip: Read the trust and read the statute on priority of debts for estates before you make any distributions. If you don’t have the statute or don’t understand the trust, get a professional to help.
Yes, an attorney’s help will cost you a little money, but the cost will be small compared to the cost you will pay if one of your beneficiaries file a lawsuit not to mention the time you have to take off from work, the family relationships that will be damaged, and the tension and stress you will feel. Do it right from the beginning.