What is a Trustee?
The trustee acts as a “custodian” for all assets that are held within a trust. This means that the trustee is responsible for managing and administering a trust according to the instructions left by the Trustor or Grantor—the person who set up the trust. In many cases, the person setting up the trust names themselves as the trustee until they become incapacitated or die, at which time the successor trustee will take over the responsibilities of trustee. In its simplest form, a trustee is the named person who manages the assets in the trust.
Choosing the right trustee—whether that trustee will take over the duties immediately, or upon your incapacitation or death—can be daunting. While most people choose a friend or family member to act as trustee, there is always the potential for family drama or resentment with this option. While a person close to you will know and understand your family dynamics, that can be a mixed blessing.
You could choose your estate planning lawyer to assume the role of trustee which can minimize hurt feelings or disagreements among your loved one. If your relationship with the estate planning attorney is long-term, then the attorney will have insight into your family dynamics. Trustee responsibilities can be extensive and diverse, so having the right trustee is essential.
What is the Difference Between a Trustee and a Trustor?
The trustor or grantor is the person who establishes the trust and is usually either an individual or a married couple. The trustee is the person or persons designated by the trust document to hold and manage the property in the trust. The trustee can be the same person as the trustor, in which case a successor trustee must be named. The trustor is responsible for ensuring properties are transferred to the trust to be held and managed by the trustee for the benefit of the beneficiaries.
What are the Trustee Responsibilities?
- The responsibility of a trustee is essentially to carry out the directions of the trust. Since the goal of any trust is to protect your legacy, the trustee is charged with performing the following tasks:
- The trustee must always act as a fiduciary, which means protecting the investments and distribution of the trust. The role of fiduciary holds the trustee to very high standards that include exhibiting even more care for the trust than they would to their own personal finances.
- A deep understanding of the trust terms and the duty of protecting the trust assets is essential for a trustee. Assets within the trust should always remain safe, so the trustee must not only understand the outlined terms of the trust but should also be able to review the trust records and determine that they are accurate, and in order.
In some cases, the trustee will be charged with the investment of assets as a means of preserving those assets now as well as in the future.
- The trustee must distribute or administer assets to beneficiaries as outlined in the trust.
- Ongoing decisions regarding how and when beneficiaries will receive payments or assets must be made by the trustee. The trust may state that the trustee can give additional distributions “as needed,” making the trust more discretionary when determining legitimate needs.
- Record-keeping is an essential duty of a trustee, keeping track of all records and preparing tax-related forms or filing taxes.
Trustees must be able to answer questions from beneficiaries in a comprehensive manner. This communication could include providing statements and account information or even providing an overview of tax returns.
The duties of a trustee can change over time. When you are both the trustor and the trustee, you have more flexibility as far as what you can and cannot do, however, once you become incapacitated or upon your death, your named successor trustee will step in and take over these responsibilities.
It is important to note that a trustee can potentially be held personally liable if decisions made are clearly in the best interests of the trust or on behalf of the benefits to named beneficiaries. Keeping accurate, detailed records of all financial transactions and distributions is the single best thing a trustee can do to protect themselves, as well as the trust. A trustee can be paid “reasonable compensation” to perform the duties of a trustee. The compensation amount is usually spelled out in the trust document.
Can a Trustee Also Be a Beneficiary?
A trustee can also be a beneficiary of the trust, but this may not always be a wise decision. When the trustee is a beneficiary, there are specific guidelines that must be followed. It can be convenient to name a beneficiary as a trustee and a trustee-beneficiary has a vested interest in how the trust is administered. On the other hand, naming a beneficiary as the trustee can potentially create conflict with other beneficiaries. If the primary aim of the trust is beneficiary asset protection, that objective could be endangered by having a beneficiary serve as trustee.
While normally, a trustee cannot use the money and property in the trust to benefit themselves, this obligation to trustee responsibilities becomes much fuzzier when the trustee is also a beneficiary. A trustee should always be transparent, and when a trustee is also a beneficiary, this is even more important. By being up-front and open about their actions, the trustee-beneficiary can avoid conflict with other beneficiaries. In short, the trustee-beneficiary must strictly adhere to the terms of the trust, avoiding any appearance of preference for himself or herself.
How Can an Attorney Help a Trustee?
If you’ve been named as trustee or successor trustee, you may not fully understand your trustee responsibilities. Having an experienced estate planning attorney can significantly simplify your tasks by doing the following:
- Explaining the state and federal laws that govern the trust to you
- Helping you understand the complex trust terms that you must understand and abide by
- Assisting with any beneficiary conflicts
- Advising in the event that trust litigation occurs. This could happen if the trust were to be contested, or if a beneficiary attempted to revoke or terminate the trust
- Assisting when modification or termination of the trust is necessary
Getting the Help You Need from Attorney Eric Gullotta and Gullotta Law Group
Whether you are contemplating having a trust set up, or you are the named trustee or successor trustee for a trust, the trustee responsibilities can be overwhelming. Attorney Eric Gullotta is committed to making your trustee responsibilities or trust administration as simple as possible for you. You will work directly with Eric throughout, thus streamlining and simplifying the overall process. Contact the Gullotta Law Group today for exemplary assistance with trust issues.