Trustees are legally and financially responsible for maintaining trust funds and carrying our their instructions.
Trustees oversee the funds and are relied upon to invest assets, file taxes, and report to beneficiaries.
If you are a trustee, make sure you maintain the highest standards of financial stewardship. Any irregularity is your responsibility and could result in you being sued for breach of fiduciary duty.
The trust may designate more than one trustee. Co-trustees can serve together, or a successor trustee can be designated in case the trustee cannot carry out their duties.
When the person who set up the trust (known as a grantor) dies, new paperwork must be filed. The trustee is responsible for filing the needed documents accurately and on time.
Creating a trust can be part of an overall estate plan and is generally used to preserve wealth.
A trust is a legal entity that can be used to protect assets, since it cannot be touched by creditors, it doesn’t have to go through probate after the person who set it up (known as the grantor) dies, and it can reduce the inheritance tax burden.
Another reason trusts offer more security is that they are overseen by a person whose job it is to protect the financial health of the trust. That person is called a trustee.
The trustee’s duty is to act in the best interests of the trust—while the grantor is alive, and after they are gone.
If a parent sets up a trust for a child, for instance, the trustee is responsible carrying out the instructions of the trust. That can mean they simply distribute a monthly payment to them, for instance, or that can mean holding the funds until a specific age when the trust is turned over to them.
In addition to carrying out the provisions and instructions of the trust, the trustee also has fiduciary responsibility for investing the assets, filing taxes, and reporting to beneficiaries.
Many grantors choose to be the trustee and manage the trust for as long as possible. Married couples are often co-trustees so that the surviving spouse can continue to handle their finances. Sometimes two or more adult children are named to act together or a corporate trustee (bank or trust company) is named.
It is your job to protect the trust, so it is your responsibility to keep the finances above reproach.
A trustee can also be a beneficiary. In addition, there may be more than one trustee (known as co-trustees), and the trust may also name a successor trustee (in the event that the original trustee cannot perform their duties).
Trustees are entitled to reasonable compensation for their services, which are often defined in the trust document. If the trust document provides no guidelines, compensation is generally determined by state law.
First, become familiar with the trust and its provisions, including the location of important papers (e.g., trust document, trust assets, and past account records) and the names of any co-trustees and successor trustees.
Keep in mind, trustees are required to stay transparent in all dealings and your responsibilities include:
Investing the trust assets responsibly.
Administering the trust and making decisions according to its terms.
Preparing any records, statements, and tax returns and keeping accurate records.
Communicating regularly with beneficiaries, including issuing account statements and tax reports
Finding answers to any questions the beneficiaries may have concerning the trust.
It is important to protect yourself from any accusations that you have misappropriated funds in any way. It is your job to protect the trust, so it is your responsibility to keep the finances above reproach.
For this reason, you cannot mix trust assets with your own, use trust assets for your benefit (unless authorized by the trust), or treat beneficiaries differently (unless authorized by the trust).
As a trustee, you can be sued for breach of fiduciary duty if you:
Refuse to give an accounting.
Steal from a trust.
Engage in self-dealing (i.e., purchase assets from the trust, borrow from the trust—even if it was repaid—use trust assets to invest in their own business, etc.).
As the trustee you must abide by the trust’s terms and comply with state laws, and you are responsible for filing all documents accurately and on time.
You’ll want to be in contact with the executor or administrator of the estate, who is the person legally empowered to act on behalf of the entire estate and is responsible for guiding it through the probate process.
It may also be helpful to meet with an attorney to review the trust and next steps, especially if the beneficiaries have questions.
Keep in mind, any trustee who is planning to meet with an attorney should not sell or distribute any assets beforehand.
If all assets have been properly accounted for, either through transfers to the trust or the use of beneficiary designations, then probate is not required. If probate is required, the trustee and the executor or administrator must ensure that any assets that should be distributed to the trust are indeed deposited.
Next steps may include:
Informing the family of the trustee role and notifying any co-trustees or successor trustees.
Collecting any of the trust’s death benefits and putting them in an interest-bearing account until assets are distributed. (The trustee shouldn’t make any distributions until after it is determined there is enough money to pay all expenses, including taxes.)
Notifying financial institutions of the grantor’s death, providing a certified death certificate, a certificate of trust, and personal identification.
Finalizing the list of assets with the exact values as of the grantor’s death date.
Once all of this is done, the assets are distributed according to the trust’s instructions: either by transferring the trust’s funds to beneficiaries or keeping them in a trust.
If they stay in a trust, it will need a new tax identification number, and bookkeeping and reporting procedures must be maintained.
Acting as a trustee is complex and time-consuming, so it’s important that you are well suited to the role. Especially during periods of grief and heightened emotions, it can be reasonable to decide that just because the grantor nominated you does not mean that you have to accept the position, or continue indefinitely.
First, check the original trust document to see if a successor trustee was named. If not, you can ask the grantor to name a successor, if the grantor is still alive. If not, you may be able to ask beneficiaries to allow you to resign and name a successor, depending on the terms of the trust. Barring that, you can always seek help from the court to name a successor.
Keep in mind, before you hand over trustee duties, you'll need to provide a full financial accounting of the trust, along with financial records, tax returns, and any contracts you signed as trustee.
The most important thing is to make sure the trust and its beneficiaries are taken care of, and if you are not able to fulfill those duties, there is no shame in handing over the responsibility to someone else ●
Everything your loved one owned, from their home to their shoes to their dishes to the cash in their wallet, will need to find its way to a new owner. We will guide you to all the various types of assets and how each one should be handled.