In recent years, trusts have become a commonplace addition to even the simplest estate plan. Unfortunately, the creator of a trust does not always discuss the appointment of a Trustee with the intended Trustee. If you recently learned that you were appointed as a Trustee and never served as a Trustee, you probably do not know where to begin in your trust administration duties. Let’s explore what a Trustee does.
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also called a Trustor or a Grantor, who transfers property to a Trustee. The Trustee holds that property for the trust beneficiaries.
All trusts are broadly divided into two categories – testamentary and living (inter vivos) trusts. Testamentary trusts do not become active during the lifetime of the Settlor. Instead, a testamentary trust is typically activated by a provision in the Settlor’s Last Will and Testament. A living trust, on the other hand, activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts. As the name implies, an irrevocable trust cannot be changed, modified, or terminated by the Settlor once it activates. If the trust is a revocable living trust, however, the Settlor may modify or terminate the trust at any time.
What Are the Duties and Responsibilities of a Trustee?
In general, the Trustee’s job is to oversee the administration of the trust and manage the trust assets. That explanation, however, is an over-simplification of the duties and responsibilities of a Trustee. In practice, a Trustee plays several diverse roles during the administration of a trust. Just a few of the duties and responsibilities you will have as a Trustee include:
- Managing and protecting trust assets
- Abiding by the trust terms unless they are impossible, illegal, or unconscionable
- Investing trust funds using the “Prudent Investor Standard”
- Monitoring trust investments
- Communicating with trust beneficiaries
- Resolving conflicts among beneficiaries
- Making discretionary decisions
- Distributing trust funds to beneficiaries
- Approving or denying distributions if given discretionary authority
- Keeping trust records
- Preparing and paying trust taxes
How Can a Trust Administration Attorney Help?
One of the most common mistakes Settlors make when creating a trust is naming someone as Trustee because they “trust” that person instead of stopping to think if the individual has the experience and/or skills necessary to administer the trust. If you find yourself named as a Trustee, and you are unsure about your ability to successfully administer the trust, failing to ask for help when you need it is a huge mistake that could even lead to personal liability for errors you might make as a result. An experienced trust administration attorney can provide you with advice and guidance in your role as Trustee to ensure that do not make any costly mistakes. Your abilities and experience, the complexity of the trust agreement, and the size of the trust assets will all help determine how much help you need in your role as Trustee; however, it is definitely in your best interest, and the best interest of the trust beneficiaries, for you to consult with an experienced trust attorney as soon as possible.
Please download our FREE estate planning checklist. If you have additional questions or concerns about how to administer a trust, contact us at the Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 or by filling out our online contact form.