Serving as trustee can have significant pitfalls.(Knight Ridder Newspapers)

Q. I have always been close to my uncle and aunt who had no children of their own. Now, as they approach their 80s, they have asked me to become involved in their estate planning. Much to my surprise, these quiet, modest people have assets of more than $3 million, and they have decided to benefit, in different percentages, their 16 nieces and nephews, 12 grandnieces and nephews, and some favorite charities when the last of them dies. They asked that I be both their trustee and the personal representative of their estates. Although I am flattered, I am concerned about the time commitment (I am a physician), the risk of dealing with so many people (many of whom I do not know well), and the length of the commitment (some of the grandnieces are babies). Yet, I don't want to turn them down. I would like your insight.

A. We agree with your concerns. Trustees are fiduciaries who have a duty to act in the best interests of beneficiaries, and today, lawsuits are waiting to happen because the duties and responsibilities of fiduciaries are often poorly understood by both trustees and beneficiaries who, as here, will receive windfall benefits from unexpected sources.

People who establish trusts are called "settlers." Trusts own and control property under terms established by the settlers. Once property is placed in the trust, the trustee holds legal title for the benefit of the beneficiaries who have equitable interests in that property. In other words, the trust divides property ownership between the trustee _ who has the responsibility to properly administer and distribute the trust property _ and the beneficiaries _ who receive the benefits, all according to the settlor's directions. Each trust should specifically state its purpose, the identity and share of each beneficiary, the specific property to be placed in the trust, the duties of the trustee, and the identity of the trustee.

Since a "trust" creates a "fiduciary relationship" between the trustee and each beneficiary, the trustee immediately incurs the risk of potential liability to ...