Picking who will serve as a successor Trustee for your Trust (after you are gone or during incapacity) is an extremely important decision. Before choosing who is going to be in charge of holding legal title to the Trust property, consider all the responsibilities associated with that role. It is equally important for whoever you choose to serve as Trustee to understand the powers and responsibilities associated with the job. The following summary outline can be helpful to show a Trustee what his or her job will entail.
1. Read the Trust
The Trust instrument will specifically outline the Trustee’s administrative responsibilities, powers, and restrictions on powers as well as the beneficiaries’ rights to distributions. It is therefore important for the Trustee to read the entire Trust.
2. Duty of Confidentiality
The Trustee owes a duty of confidentiality to the beneficiaries with respect to all of the Trust terms.
3. Managing the Trust for the Benefit of the Beneficiaries
Every action the Trustee takes in connection with the Trust must be for the benefit of the beneficiaries.
4. Duty to Protect Trust Property
The Trustee must administer the Trust in a prudent manner to protect Trust property. This includes enforcing Trust claims, keeping appropriate records, making safe and wise investments, and incurring only reasonable costs.
5. The Duty of Loyalty
A trustee owes the Trust beneficiaries a duty of loyalty. This means the Trustee may not engage in any transaction with the Trust or with any Trust beneficiary. In other words, the Trustee cannot borrow or lend money from or to the Trust or a Trust beneficiary, buy or sell property from the Trust or a Trust beneficiary, or take away a Trust’s potential business opportunities.
- 6. Inform Beneficiaries
- providing each beneficiary with a copy of the Trust instrument,
- sending a periodic accounting to each beneficiary,
- notifying the beneficiaries before the Trustee takes any significant action with regard to the Trust,
- notifying the beneficiaries when a new Trustee takes office
- notifying the beneficiaries when a revocable Trust becomes irrevocable as a result of the settlor’s death, and
- notifying the beneficiaries when the Trustee’s compensation changes.
Another duty the Trustee has it to keep the beneficiaries fully informed about Trust operations. This entails:
7. File Tax Returns
The Trustee is responsible for filing annual federal and state tax returns, reporting the income earned on Trust assets.
8. Prudently Invest Trust Funds
When it comes to investing Trust funds, the Trustee is held to the standard of a “prudent investor.” This means he or she must think about the Trust purpose, terms, and distribution requirements whenever making investment decisions. The Trustee also needs to hold a diversified portfolio of assets for the Trust to minimize loss and have an investment strategy with risk and return objectives that are reasonably suited to the Trust. Sometimes this means working with a professional investment advisor to make sure Trust assets are adequately protected.
The Astill Law Office has provided high quality legal services for over 30 years. We specialize in wills, trusts, estate planning, and asset protection. If you have any questions about creating a Trust, Will, or estate planning in general, contact The Astill Law Office at 801-438-8698.