4 Key Responsibilities of a Trustee

Every trust must have a trustee. The trustee is the individual who manages and takes care of the assets inside of the trust. While many people elect to be their own trustees while they are living, they often choose successor trustees for after they passed or become incapacitated. Some trusts also have third-party trustees designated immediately.

Trustees are an important part of any trust because if they fail to their job correctly, assets meant for the beneficiaries may not be available as the grantor (trust maker) intended. Every trustee has slightly different duties based on the language of the trust instrument. However, trustees often generally have many of the same overarching responsibilities.

  1. Fiduciary Responsibility

As a trustee, you are responsible for another person’s assets. Beneficiaries of the trust depend on you to make wise and informed decisions about the property in the trust. As a fiduciary, you are held to a higher standard when it comes to decision-making. You should be making decisions based on what is good for the trust and the beneficiaries, without regard for your personal gain or opinions.

  1. Distributions

The trustee is responsible for making distributions to the beneficiaries. In some situations, these distributions are already set out in the trust instrument. In other trusts, the trustee may have discretion on when to make distributions. For example, if the trust was created to fulfill a certain beneficiary’s financial needs, you may need to evaluate whether the recipient actually needs the distribution. This need is also balanced against the trust assets and the desire to maintain the trust going forward, if that is the intention of the grantor.

  1. Accounting

The individual in the trustee role must also keep close track of income, distributions, and any expenses that the trust incurs. The trustee is then required to report this information to the beneficiaries annually or as often as the trust instrument requires. The trustee will also use this information to fill out taxes on behalf of the trust if necessary.

  1. Delegation

Many people choose close relatives or friends to act as a trustee on their behalf. However, trusts can be complicated and involve the need for legal expertise, tax experience, or investment knowledge. While a trustee may certainly have some of these attributes, it may also be necessary to outsource some of these tasks to a professional. As such, a trustee can use trust funds in many situations to employ experts in these areas. In some circumstances, a grantor will designate a bank or business as a trustee to avoid problems with inexperience or confusion.

Choosing the right person to be a trustee can be tough, but a carefully crafted trust instrument will allow your trustee all of the resources he or she needs to be successful in this role. Our team can help you draft such a document. Call to set up an appointment today.

Written by Legacy Planning Law Group

Legacy Planning Law Group is dedicated to working with individuals and families to help protect the assets they have built throughout their life, and make everything simpler for families who have lost a loved one. We help thoughtful people achieve the peace of mind that comes with planning their personal legacy and passing on family harmony.