When working on your estate plan, a question that may arise if you are planning with a trust is who will be your Trustee?  A Trustee is a person who is responsible for the assets that are held within a trust.  They manage and administer the assets held within the trust according to the instructions included in the trust document.  For revocable trust planning, this is often a role in which you would initially serve – you are the Trustee of your own trust and still able to manage your own assets.  A successor Trustee may step in if you are incapacitated and no longer able to manage your property yourself.  The successor Trustee then undertakes responsibilities such as keeping track of the trust assets, distributing funds to beneficiaries, and filing income taxes for the trust (if required).

Responsibilities of a Trustee

The main responsibilities of a Trustee can include any of the following:

Administer the trust according to the terms of the trust document

The Trustee doesn’t get to make up their own rules for how the funds in the trust are managed.  The trust document itself provides the instructions on what the Trustee is expected to do.  The Trustee should read the trust document and be intimately familiar with the terms outlined in the trust.  They should know who the beneficiaries are and how to contact them.  They should also have access to and keep records for all the assets held by the trust.

Prudently Manage Trust Assets

A Trustee has a duty to prudently invest the assets held within the trust.  The goal is to ensure the assets are preserved now and in the future for the benefit of the beneficiaries.  They must exercise the skill, care and diligence that a prudent person acting as Trustee would to manage the assets.  They should establish investment objectives and conduct a periodic review of trust assets to ensure they are being managed according to these objectives.

Uphold their Fiduciary Duty

A Trustee has a fiduciary duty to the beneficiaries.  This means they are held to a high standard to act with due care, good faith, prudent investment, and loyalty to the current and future beneficiaries.  This means a higher level of attention than they may pay to their personal assets to ensure the trust assets are being protected and well-managed.

Keep Records and Prepare Taxes

The Trustee is responsible for compiling records of the income collected, expenses, and other transactions for the trust.  They have to file accountings according to the trust terms and applicable state law.  They are responsible for preparing and filing tax returns for the trust and issuing income statement to the beneficiaries.  They are also responsible for providing information to the beneficiaries, as provided for under the trust terms.

Communicate and Answer Questions

The Trustee is responsible for communicating with the beneficiaries to keep them informed on the trust (to the extent provided for under the terms and state law).  They are responsible for timely answering questions from the beneficiaries.

Who Should I Choose as Trustee?

A Trustee plays a big role in an estate plan.  Friends or family members can be selected to serve in this role, or you may select a professional fiduciary or a trust company.  Friends and family are a common selection but can pose risks.  It is often the first time this person has served as a Trustee, and there can be a bit of a learning curve.  Sometimes it can exacerbate family dynamics if the Trustee has a close relationship with one of the beneficiaries.  They are essentially in the way of that person’s access to the trust funds – this can create some tense conversations and upset some delicate relationships.  A professional fiduciary or a trust company can relieve those tensions.  Though they charge for their services, it is not their first time, and they can be more efficient in managing the property in the trust.  It also creates a degree of separation between the beneficiary that a family member or friend cannot provide.

When selecting a Trustee, this person should be honest, trustworthy, and good with managing money.  They should be detail-oriented and organized and able to keep track of important trust details.  They should have good people skills and an ability to communicate well with others.  Additionally, it should be a person who is in good health that will be around for the term they would need to serve as Trustee.  If your Trustee predeceases you, another will need to be appointed.

Selecting a Trustee is a decision that should be taken with due care.  Knowing the duties a Trustee must perform can help to make the selection process simpler.  If you review your current trust and are concerned about who you have named as Trustees, please contact Maser, Amundson & Boggio, P.A., and we can help update your documents to the proper Trustee to serve.