When you create a comprehensive estate plan, it is likely to include one or multiple trusts. A trust is an incredibly useful document in estate planning because it prevents the assets listed in it from falling under state jurisdiction after your death. Instead, the trust and its assets become the responsibility of the trustee. You should understand the importance of selecting a trustworthy and responsible trustee. A trust attorney can help you select the right person to act as the trustee for your estate plan.
Naming someone a trustee is a big decision. This person, whether they are a family member, friend, or professional, has significant legal obligations and responsibilities. It is essential to understand these responsibilities when selecting an individual. You want to be sure they can act in the interests of the trust and effectively distribute and close the trust without following their own personal interests.
The Powers and Responsibilities of a Trustee
The biggest obligation of a trustee, which impacts all their other responsibilities to the trust, is to act with fiduciary duty to the trust and beneficiaries. This means acting in the interests of those parties.
The abilities and responsibilities of a trustee include:
- Manage and Protect the Assets in the Trust: A trustee should have access to the documents in a trust, inventory the assets, and ensure the records are accurate and the assets are all in order. They should review all assets to be sure they are managed properly based on the wishes and goals of the trust. A trustee can also invest the assets in a trust if that is beneficial to preserving the assets.
- Administer the Trust According to the Trust’s Terms: A trustee must understand a trust’s terms and know the beneficiaries of assets in the trust. They must administer assets according to the trust’s wishes, including maintaining documents, collecting assets, and transferring them properly. They should also discuss the goals of the beneficiary or beneficiaries and understand their intentions. They must balance this with the intention of the creator of the trust, as well as the current and future interests of the beneficiaries.
- Distribute the Assets in a Trust: The trustee must follow the terms of distribution of the assets and use assets for how they are meant to be used. They must communicate their intentions to beneficiaries and provide them with relevant information regarding the trust’s assets. When it is time to distribute the assets to their beneficiaries, the trustee must do so efficiently and accurately.
- Prepare Records, Accounting, and Taxes for the Trust: A trustee should keep accurate records, both for the interests of the trust and beneficiaries and to protect their own interests. These records should cover all transactions, income earned, and expenses in the trust. The trustee should pay relevant taxes for the trust.
- Oversee the Actions of Third Parties: If necessary, the trustee should seek professional aid for any duties they can’t reasonably carry out themselves. The trustee must then review the work and responsibilities of those professionals to ensure they support the interests of the trust.
Q: Can a Trustee Be Held Personally Liable?
A: A trustee has a legal responsibility to act in ways that are beneficial to the trust, its contents, and its beneficiaries. If a trustee takes any actions or inactions that are counter to the interests of these parties, they can be held personally liable for their breach of fiduciary duty. They are held to an objective standard of care and can obtain professional help if they cannot reasonably complete the duties themself.
If the court determines a trustee has breached their duty, they may owe the beneficiaries damages and even face criminal liability.
Q: What Can a Trustee Do and Not Do?
A: A trustee must act in a way that is beneficial to and in the interests of the trust and beneficiaries of the trust and is therefore legally prohibited from using assets in a trust for their own personal wishes or gain.
A trustee must act according to the wishes of the trust, protect confidential information, safeguard and protect assets in the trust, and oversee any responsibilities they give to other professionals. A trustee cannot act outside the guidelines and authority given to them by the trust.
Q: What Power Does a Trustee Have Over a Trust?
A: A trustee has the powers given to them by the trust and by probate law. This includes the power to:
- Collect and inventory all assets prior to protecting and preserving the assets
- Prepare records for the income, expenses, sales, and transactions of assets in the trust
- Prepare accurate accounting of assets
- File tax information periodically on assets
- Manage and sell assets to settle debts, debtor claims, taxes, and the expenses of trust administration
- Invest and diversify assets to preserve the assets
The trustee has any other powers given to them by the trust, and the trust can also prevent certain powers a trustee would otherwise have.
Q: What Are the Risks of Being a Trustee?
A: A trustee has many legal obligations and responsibilities. A trustee can be held personally, legally, and financially liable if they do not act according to fiduciary duty. A trustee can both act in a way that is against fiduciary duty and fail to take an action that upholds their fiduciary duty.
A trustee who fails to uphold their obligations may have to pay from their own personal finances if they do not act properly. A trustee can also be held criminally liable for using trust assets for personal gain. If a trustee is unaware of their responsibilities, they can face significant risks.
Protect Your Interests and Your Beneficiaries With the Right Trustee
Many people create a trust and a comprehensive estate plan to give themselves comfort and peace of mind about how their estate will be handled after their death. When you create an estate plan and a trust, you are placing a lot of faith in the person you name as trustee. It is important that this person understands the significant responsibility and is qualified to handle it.
An estate planning attorney at Stange Law Firm can help you navigate this decision and discuss it with your loved ones. Contact our team today.