Co-Trustees

[sarnoc]

Upon my father's death, my brother and I (Colorado residents) became Successor Co-Trustees of his Revocable Trust, governed under the laws of the State of Arizona. Trust assets included some stocks and bonds held in a brokerage account in the name of the Trust as well as a separate IRA account in my father's name.

Two days after his death, both accounts were liquidated by the broker, who claims he received liquidation instructions from my brother (which he denies). My question - could my brother, as Co-Trustee, authorize liquidation of trust assets without my knowledge and consent? The trust document does not specifically allow or disallow independent action by the Successor Co-Trustees. Also, would the IRA account be considered part of the trust assets?

 

[ALawyer]

First, IRA Assets are normally NOT owned thru a Trust, but directly. They may name the Trust as beneficiary however.

Second, the smartest thing to do on a death is often to sell the trust assets and convert them to cash. There is a stepped up basis on date of death (thus not tax consequences) and most inheritors have different investment patterns than the deceased.
(One exception, if people intended to hold the assets in the trust and wanted to see if they go up or down within a 90 day period for estate tax valuation purposes, they may hold, but this is usually done with large blocks of stock , and often in a controlled business.)

Here the broker may have made an unauthorized trade, or the other trustee may feel stupid fpohaving said sell when with the benefit of hindsight the market went way up.

If it was the former complian to the firm's compliance officer immediaitely, and if you do not get satisfaction, you may seek an NASD arbitration proceeding to recover damages.

The broker may, of course, continue to claim he was called by one of the trustees (as he has) and/or relied on a signature card that said instrustcions from 1 trustee is sufficient -- while the point you would make is even if he was it was not authorized under the trust as both successor trustees had to authorize trades. If that is the case, however, I am not sure how strong that case would be before arbitrators as it could easily look to be as if merely you saw the market rise and wanted to cash in on it.