Summary:

To ensure their estate was managed according to their wishes, the parents created a revocable family trust and made their two sons co-trustees.

The parents signed a document transferring the trust management from themselves as trustees to their sons as successor trustees while they were still living.

The two sons found themselves in a unique and potentially conflict-ridden position, serving as both the successor trustees and the sole trust beneficiaries. This dual role could lead to conflicts of interest and complex decision-making, underscoring family trust management's intricate and challenging nature.

When mom and dad die, the sons will collect the unearned goodies as beneficiaries.

One son wanted to borrow money against the trust property because the trust allowed the successor trustees to encumber it, which meant using it as collateral for a loan.

The other son objected because the loan proceeds would not benefit the parents, and he didn't need the money. He was concerned that if the loan was not repaid, the trust property could be at risk of foreclosure, potentially losing the family's wealth.

The two had a hostile relationship because, despite benefiting from their parents' efforts and wealth accumulation, they each had different financial needs, creating the potential for tension and conflict in managing the family trust. This conflict is common in family trust management as balancing the trustees' needs and desires with the trust's best interests can be challenging.

Is the son acting selfishly by borrowing from his parents' property? This ethical dilemma is a common issue in family trust management.

Do many families face this common situation? 

Article:

When a trustee seeks a loan on behalf of the trust, the lender becomes a key player in decision-making. In our example, the lender's recognition of the two successor trustees and their request for a signed letter of interest, a standard underwriting requirement, underscores the lender's significant role in these transactions.

The trustees then decide how to distribute the loan's net proceeds and who will be responsible for the monthly payments. The lender's involvement highlights the significance of their role in these transactions.

Both successor trustees are involved in and legally obligated to sign the loan documents on behalf of the trust. It's crucial to note that the lender will reject the loan application if one of the trustees refuses to sign. This underscores the potential consequences of their actions, such as the trust losing its property, and the importance of cooperation and agreement between the trustees in such transactions. If the loan is not repaid, the trust property could be at risk of foreclosure, potentially losing the family's wealth.

If the trust document allows either successor trustee to encumber the property independently of the other, both must still agree because they are the beneficiaries.

Successor trustees hold the property title for the trust and the beneficiaries. However, they are legally obligated to make the payments, ensuring the trust's financial stability and fulfilling their parents' wishes. This legal obligation means they must act in the trust's best interest, even if it conflicts with their desires or needs. This can create a conflict of interest when their financial needs or desires are at odds with what is best for the trust.