Being named a trustee in someone’s revocable is an honor and a privilege. With such privilege comes significant responsibility. It doesn’t matter if you are appointed as a trustee after death or at incapacity. Your job is nonetheless critical and must be taken seriously.
What is a trustee? How is this different from an executor?
A trustee is a person or entity responsible for managing, investing, and handing out the money and property owned by the trust. When a revocable living trust is created, the grantor, the person who created the trust, is usually named the initial trustee. This allows the grantor to maintain the same amount of control over and enjoyment of the grantor’s accounts and property as the grantor had before the trust was created, just in a different role.
A trustee is a person or entity that the grantor has named to take over when the grantor can no longer act as the trustee, whether due to disability, death, or a voluntary desire to have someone else manage the trust’s accounts and property.
When there is no trust or when there is a trust and a pour-over will, the person who manages and distributes the assets is an executor.
What are my responsibilities and duties as the trustee?
There are several responsibilities you may need to carry out when acting as trustee:
- Locate the relevant estate planning documents. These documents prove your authority to act and understand what the grantor has instructed you to do.
- Collect important documents such as insurance policies, real estate deeds, car titles, bank and investment account statements, and tax returns.
- Meet with your loved one’s professional advisor team (estate planning attorney, tax professional, financial advisor, etc.) to plan the strategy for administering the trust and to prepare the legal documents needed to carry out that plan.
- Create a list of debts, creditors, and current expenses. Now that you manage the trust account, you must ensure that all bills get paid.
- Make a list of the trust beneficiaries and heirs-at-law and their addresses. Work with an attorney to determine what type of notice each person is entitled to and how and when this notice will be given.
- Prepare a list of your loved one’s property, accounts, jewelry, and other valuables. The items owned by the trust are now your responsibility. You must know where they are and how much they are worth and protect them from loss or damage.
- Maintain the trust accounting—that is, keep a record of all deposits, expenses, and transfers from the trust (even if they are to or for the benefit of your loved one).
A trustee also has some important duties that you should be aware of:
- Duty to administer the trust. The trustee must follow the terms and purposes of the trust document and act in good faith.
- Duty of loyalty. The trustee must administer the trust solely in the best interests of the beneficiaries unless the trust document allows for something different, or unless a specific transaction is approved by a court or consented to by the trust beneficiaries.
- Duty of impartiality. When there is more than one trust beneficiary, the trustee must act impartially concerning each beneficiary’s interest in the trust property; and although “impartial” does not necessarily mean “equal,” a trustee must still carefully avoid showing favoritism between beneficiaries.
- Duty to control and protect trust property. A trustee must secure real property, change locks, and take similar protective measures. The trustee must physically secure personal property to avoid damage or loss. A trustee must also inform financial institutions of the trustee’s authority to control the trust assets in the trust’s name.
Accepting the role of trustee is serious and requires knowledge of many things. The job can be intimidating. However, you don’t have to act alone. When in doubt, you can employ an advisor team (e.g., trust administration attorney, CPA, financial advisor, and insurance agent). It is better to ask for help rather than tackle something alone and get it wrong. You will pay dearly if you do. Trustees can be held liable for breaching their duties.
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