Choosing a Trustee is as important a task as choosing an Executor for your estate. We’ll review the Trustee duties and what a Trustee may and may not do within those duties.
First, let’s review the purpose of a Trust as an estate planning tool. A trust is a legal arrangement in which a “grantor,” the person creating the trust, transfers ownership of property into the name of the trust and selects a Trustee to manage it. The Trustee may be a family member, a trust attorney, or, in the case of a living trust, the grantor. The Trustee is tasked with managing or distributing the property for the benefit of the beneficiaries named within the trust documents.
A Trustee of any Trust assumes a fiduciary duty, meaning they have a high standard of accountability as they owe a high level of care, trust and confidence under their Trustee duties.
What a Trustee May Do
A Trustee must manage the Trust and act in the best interest of the Trust’s Beneficiaries. They also must act within the terms of the Trust documents. Their Trustee duties also include reporting and tax filings. A Trustee may hire financial advisors, investment advisors, accountants, Trust attorneys or other professionals to advise on issues involving the Trust.
The Trustee may also decide whether or not to distribute a Trust’s principal or interest income to a beneficiary. This is not based on their opinion, but an evaluation of a Beneficiary’s needs, income and more, along with the Trust terms. A Trustee may also collect fees for their Trustee duties, based on the terms of the Trust.
What a Trustee May Not Do
A Trustee may not use the property or assets of the Trust for any personal gain. They must also not make imprudent investment decisions for the Trust’s assets. In other words, they must always act in the best interests of the Beneficiaries.
Trustee duties can be complex and time consuming. When you are creating a Trust, work with a Trust attorney to determine the best type of Trust for your needs, as well as receive advice on choosing a Trustee.
- How Estate Planning for a Family May Trap the Unwary Practitioner - August 31, 2022
- State Income Taxation of Social Security Benefits - August 24, 2022
- Understanding Tax Apportionment Clauses - August 17, 2022
