For Jacksonville residents who have been married or in a longstanding relationship, it’s almost certain…
Before accepting the role of a trustee, it is important to have a thorough understanding of what you will need to do and for how long. Trustees are often appointed to manage trust assets for a child or adult with special needs. This responsibility could be for a lifetime, so be sure that you are up for the task.
Unlike a will which only takes effect at death, a trust goes into effect right away when assets are transferred to the trust. A trust legally transfers assets from the owner, or grantor, to a trustee. A trust establishes the terms for the trustee’s management of the assets, distributions to designated beneficiaries, and the ultimate transfer of the assets at death. In addition, the trust sets out the responsibilities of the trustee, so when serving in this role, the trust is the ultimate source for determine your duties.
All trustees, however, have five common duties that are outlined in a recent article, “What are the Duties of a Trustee” from Forbes.com, as well as a responsibility to settle the trust after the grantor dies. Settling the trust includes tasks like:
1–Locating and reviewing all of the documents of the grantor, especially any funeral and burial instructions.
2–If the grantor owned a home or an apartment, changing the locks for security, notifying the homeowner’s insurance company, if the house will be unoccupied for an extended period of time, and checking on auto insurance policies, if there are cars or other vehicles.
3–Unless the executor is taking care of this task, the trustee needs to obtain multiple originals of the death certificate. These are usually ordered by the funeral director.
4–Listing all assets with the Date of Death (DOD) values of any assets. This determines the “cost basis” of assets that are to be transferred to beneficiaries. If assets are later sold and used to distribute proceeds, the cost-basis is used to determine income tax liability.
5–Consolidate multiple financial accounts into one account. The check register will become a register of trust activities and beneficiaries may inspect it. The trustee’s first responsibility is to protect the trust’s funds.
6–Pay outstanding bills and debts. The trustee may be personally liable, if this is not handled correctly.
7–Meet with an estate planning attorney to determine if the trust must file income tax returns or if the estate of the grantor must file income tax returns.
8–File claims for life insurance, IRAs and annuities.
9–Create an accounting for all trust financial activity from the grantor’s DOD to be distributed to the beneficiaries.
Afterward, the trustee continues to manage the trust ensuring adherence to the following five duties to ensure that beneficiary rights are honored. To learn more details about trust beneficiary rights in Florida, watch a brief video by Jacksonville Estate Planning Attorney Bill O’Leary, Esq.:
Administer the trust according to what the legal trust document says as outlined by the grantor and Florida law. Keep in mind that the grantor created the trust based on the circumstances and capacities of the beneficiary(ies); your role as the trustee is to respect the grantor’s intentions.
Act reasonably and competently in all trust matters including investing and budgeting trust funds so that the assets are managed effectively for the trust’s intended purposes
Act in the best interest of the beneficiary(ies) and the trust making faithful decisions so that the trustee does not have personal gains or benefits from the trust assets. If set out in the trust, charging trustee fees for payment of management duties is permissible, but should be reasonable.
Serve as the dedicated trust manager by overseeing with individual attention the financial management of trust assets and relationship with the beneficiary(ies). While professional advisors like an estate planning attorney can be hired for guidance, the trustee should be the individual overseeing their work.
Report trust management activities and accounting to the beneficiary(ies) and provide distributions in a timely manner. The trustee is responsible for maintaining a good relationship with the beneficiary(ies) so that they can easily contact the trustee and understand on a regular basis the financial status of the trust.
The responsibilities of a trustee are similar to those of running a small company in that there are specific rules to follow to ensure that the trust assets are managed effectively and those funds serve the beneficiary(ies) based on the grantor’s intended purposes. Florida law has additional requirements for trustees that ensure beneficiary rights. Read more about the duties of a trustee in our article, What You Need to Know If Asked to Serve as a Trustee.
If you have been appointed as a trustee or asked to serve as one, schedule a free discovery call with Team Legacy to learn more about your role.