Although there are many ins and outs of what makes or breaks a trust, having a good trustee to carry it out is just as important as the terms of the trust itself. Both first-time and experienced trustees alike will need to understand their trustee duties and responsibilities to best meet the requirements laid out in the trust.
Trustee Duties Checklist
Becoming a trustee is a big undertaking, and the duties span many categories. Even for an experienced trustee, it’s important to regularly review the duties and responsibilities involved. While no two trusts will be identical and there will always be nuances to consider, this checklist of trustee duties is here to give you an idea of what to expect should you take on the role of trustee.
Examine the Terms of The Trust
Before taking any action, a trustee needs to examine and comprehend the terms of the trust fully. Legal jargon can sometimes be written in a confusing way to the everyday person, so it is of the utmost importance for the trustee to look up unfamiliar terms or consult a professional to ensure a complete understanding of the trust and the intentions within.
It may take reading it several times before feeling comfortable in your understanding, but it’s always better to gain understanding before acting out of ignorance and making costly mistakes.
Account for All Assets
Sometimes, after the death of the grantor, additional assets will need to be transferred from the settler’s estate. The sooner this is done the better, as these assets will likely be important when implementing the terms of the trust.
Fiduciary Duty
Fiduciary duty, or loyalty duty, is the duty to put the interests of someone else’s assets before your own in the case of trusts. This means that no matter what, the person acting as trustee must act in the best interests of the trust. This entails quite a bit, including:
- Great attention to detail
- Protecting the trust and its assets
- Protecting the beneficiaries
- Avoiding mixing personal finances with that of the trust
- Using discretion when managing the property in the trust
The trustee must always act in the best interests of the trust and act in ways that reflect the intent laid out by the grantor, regardless of their personal beliefs or biases. While trustees are entitled to compensation, unless the trust specifically allows it, a trustee is not permitted to financially gain from the assets or property laid out in the trust beyond what they are reasonably entitled to.
Circumstances may change as the terms of the trust are being carried out. It’s up to the trustee to ensure that the proper decisions are being made and that those choices best reflect the intent of the trust and the grantor’s desires.
Keep Thorough Records
A trustee must be an excellent historian. A good trustee will document everything that they do with the assets of the trust and keep receipts. Even when making decisions with the best of intentions, there are times that the choices made might be questioned. Having a good record can protect the trustee, the trust, and beneficiaries alike.
Communicate with Beneficiaries
A good trustee should always ensure that all beneficiaries are kept up to date with the business of the trust without them having to constantly inquire about it. In addition, if a beneficiary has any questions or concerns about the terms of the trust, the trustee should be open and honest about it and provide the requested information freely. For trusts that last longer than a year or two, this is especially important.
Be Impartial
Trustees should always treat beneficiaries fairly and impartially, regardless of their personal feelings on the matter. There may be times where a trustee feels that the trust treats a particular beneficiary unfairly or believes a beneficiary should not receive what the trust deems them entitled to. In these instances, the trustee must be able to set their personal feelings aside for the sake of the trust.
Manage Assets and Property
A trustee may need to access bank accounts, submit tax returns, or collect money from investments. A trustee may also have to pay final bills, settle any outstanding debt, or file medical claims. There may even be more to manage depending on state laws or the terms of the trust.
Some grantors may have investments such as rental properties that need to be managed and maintained. It becomes the responsibility of the trustee to make sure that these rental properties are generating income and are properly taken care of until the ownership can be transferred to the beneficiary of the grantor’s choosing.
Trustee Pitfalls to Avoid
Just as it is important to know the expected trustee duties, it’s also important to be aware of common pitfalls that new or inexperienced trustees may fall into.
Inaction
Punctuality is essential for performing trustee duties properly. When a trustee avoids their tasks, there could be serious ramifications involved. Tax deadlines wait for no one and failure to file tax reports or provide documents can lead to legal repercussions. In addition, a trustee has the duty to keep all beneficiaries sufficiently informed of all trustee business. Failure to give timely updates can provide grounds for beneficiaries to sue.
Poor Recordkeeping
Failure to keep good records can come back to haunt a trustee. Poor recordkeeping can lead to disputes between beneficiaries and may even result in legal action being taken against you. When in doubt of how detailed to be, it is always best to over record what is done with the trust rather than under record.
Uncertainty
A trustee may make serious mistakes when uncertain about all of the tasks they may need to perform in their role. It is important for a trustee to carefully examine the terms of the trust as well as educate themselves on applicable state laws and regulations. Many errors can be avoided if a trustee is armed with ample knowledge.
Mismanaging Assets
Avoiding the mismanagement of assets doesn’t just protect the beneficiaries, it protects the trustee as well. If any funds are mismanaged due to imprudent investments or not distributed in full to the beneficiaries that they were intended for, the beneficiaries can seek payment from the trustee to make up for the financial losses.
How Long Do Trusts Last?
Most commonly, trusts reach their end shortly after the grantor’s death. However, trusts can be open for many years in some cases.
One common reason a trust may last a while is when a minor child is a beneficiary. The grantor may not want them to receive their assets until they reach the age of majority, or they may want the money doled out at specific milestones as indicated by the trust. Other reasons might involve the care of a special needs child or adult, who may require money continuously distributed to them throughout their lifetime.
In addition, the trustee may need to complete tasks such as managing or selling property before distributing the assets among the beneficiaries, and there is no set timeframe for how quickly these tasks can be completed.
Depending on the tasks involved in the trust, a trustee may have to be in it for the long haul.
Struggling With the Trustee Duties Checklist?
Being a trustee is a big responsibility, but no one should have to go through it alone. At AmeriEstate, we offer comprehensive trust administration help so that any new trustees can get much needed support and assistance during this trying time. Contact us today so we can help make the process of performing the tasks laid out in the trustee duties checklist as easy as possible, and download our guide on how to settle an estate.
Sources:
fiduciary duty | Wex | US Law | LII / Legal Information Institute
What Are the Duties of A Trustee?