To understand the responsibilities of a Trustee, it is a good idea to first review what a trust is.
A trust is a legal agreement that creates an entity that can own assets. People often use living trusts in their estate plans because they avoid probate and offer several other benefits related to the administration of a person’s estate, both during their lifetimes and after they pass away.
The essential parties involved in every living trust are as follows:
- The Grantor – the person who creates the trust and transfers their property into it;
- The Trustee – the individual or financial institution selected by the Grantor to manage the trust assets per the terms of the trust agreement; and
- The Beneficiaries – the individuals who benefit from the trust assets per the terms of the trust agreement.
In many cases, the Grantor will act as the Trustee during his or her lifetime, and nominate a Successor Trustee who will step in to manage the trust when the Trustee dies, becomes incapacitated, or is otherwise unable to continue as Trustee.
The Trustee’s Responsibilities
A Trustee is a fiduciary with a variety of responsibilities that they must meet. Here is a brief survey of several important responsibilities of a Trustee:
- Loyalty – a Trustee must act in the best interest of all current and future trust Beneficiaries.
- Impartiality – a Trustee must not favor any beneficiary over another, and must balance the interests of all the trust Beneficiaries, including both the income Beneficiaries and the remainder Beneficiaries.
- Productivity – a Trustee is expected to produce a reasonable amount of growth in the trust assets.
- Prudence – a Trustee must ensure that the trust assets are broadly diversified and only placed in low-risk investments devised to beat inflation.
- Accountability – a Trustee must remain accountable to the trust Beneficiaries and keep them informed.
- No Commingling – a Trustee must not commingle trust assets with his or her personal assets.
- No Self-dealing – a Trustee must not put his or her personal interest as a Beneficiary above that of any other Beneficiary.
Other Things A Trustee Needs to Know
- A Trustee has a responsibility to familiarize him or herself with the trust and its provisions, and to be aware of where the trust assets, the trust agreement, and other important documents pertaining to the Grantor’s estate are located.
- A Trustee will not be able to rely on ignorance of his or her responsibilities as a defense if he or she is sued for mismanagement of the trust assets.
- A Successor Trustee has the same responsibilities as the original Trustee when they come on board, and can be held liable if they do not manage the trust responsibly. If a Successor Trustee finds that the previous Trustee mismanaged the trust assets, he or she must make the trust Beneficiaries aware of these findings immediately.
Consult With An Experienced Trust And Estate Planning Attorney For Assistance
This is only a brief survey of the various responsibilities of a Trustee. There are many other important responsibilities that a Trustee must meet. Failure to meet any one of these responsibilities can result in personal liability for the Trustee.
Our law firm has assisted Trustees with meeting their responsibilities for many years. Let us know if we can assist you as well. Call us today or visit our contact page to arrange a free consultation with a qualified trust and estate planning attorney.