Many clients come to me to create a trust, and in doing so, they must name a trustee, or in the case of a living trust, a successor trustee, to manage the trust. But what exactly are the duties of a trustee?
1. Fiduciary duties: As a trustee, you are acting in a fiduciary capacity, which means you have the legal obligation to act in the best interest of the beneficiary named in the trust documents. Your actions must reflect this.
2. Carry out the trust terms: The trust is your road map and you must follow its directions, whether about when and how to distribute income and trust property or what reports you need to make to beneficiaries. If you do not understand the terms of the trust, you should work with a trust attorney.
3. Prudency: You have the duty to ensure that any investments you make with trust property are prudent, and not risky or speculative.
4 Make Distributions: You have the obligations to distribute the trust’s income and property according to the terms of the trust. If the trust gives the trustee discretion on making distributions, you need to evaluate the beneficiary’s current needs, future needs, other sources of income, and your responsibilities to other beneficiaries before making a decision.
5. Accounting duties: One of your jobs as trustee is to keep track of all income to, distributions from, and expenditures by the trust. Generally, you must give an account of this information to the beneficiaries on an annual basis or according to the terms of the trust. An annual tax return may be needed as well. Depending on the size of the trust, you may be able to hire an accountant to handle these accounting duties.
A trustee is able to delegate to professionals. For example, you can hire financial advisors to make investments, accountants to handle taxes and bookkeeping for the trust, and trust attorneys to advise you on questions of interpretation.