Trustees manage and protect trust assets, follow fiduciary duties, and oversee distributions during life, incapacity, and after death. This guide outlines trustee responsibilities, successor roles, tax obligations, compensation rules, and key steps in trust administration.
By Brad Nakase, Attorney
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There are numerous trust arrangements that can be utilized in the estate planning process to accomplish a variety of objectives. The selection of a trustee to oversee its assets is a feature shared by all trusts. Knowing your duties is essential if you are chosen and appointed trustee of someone’s trust.
What does a trustee do? The duties of a trustee, the selection process for a trustee, and other topics will all be covered in this article.
The individual who establishes the trust is known as the grantor, sometimes referred to as the settlor, creator, trustor, or trustmaker. Co-grantors are married couples who jointly create a single trust. The trust shall only be altered by the grantor or grantors.
The possessions held in the trust are overseen by the trustee. A lot of grantors decide to act as trustees and keep running their businesses for as many years as they can. Since married couples tend to serve as co-trustees, the spouse who survives can continue managing their funds in the event of one partner’s death or incapacity without the need for additional steps, such as judicial intervention.
Upon the trustee’s inability to continue (typically due to disability or death), a successor trustee assumes responsibility for managing the trust.
Usually, multiple names are listed consecutively in case any of them are unable to take action. A corporate trustee or adult children are occasionally named to act jointly. Sometimes the two are combined.
Following the grantor’s death, the individuals or groups that will inherit the trust’s assets are known as beneficiaries.
Assets can be owned by a trust, which is a legal body. A trust contains directives for the grantor’s last affairs, just like a will does. It also specifies the posthumous beneficiaries of the grantor’s assets.
Among the various types of trusts are:
As a supplement to a will, a revocable living trust is now commonly employed in estate planning. A revocable living trust prevents probate, or court intervention, in the event of death or incapacity. Additionally, it is adaptable. A living and capable grantor may amend the instrument, add or remove assets, or revoke it.
The grantor has to send assets into a living trust for it to function correctly. They have to rename themselves using the trust’s name instead of their own. The kind of assets that should be moved to the trust should be discussed between the grantor and their estate planning lawyer.
If the grantor passes away or becomes disabled, the court has no reason to intervene because their name is no longer on the titles. This facilitates the trustee’s ability to take over and oversee the grantor’s financial matters.
The grantor should acquaint you with the terms of the trust and where key documents, like the following, are kept:
Don’t take it personally if the grantor declines to show you the assets’ worth. When it comes to their money, some people are extremely private.
Verify that the trust has the proper titles and designations for beneficiaries updated. (Some assets might indicate the trust as an additional dependent beneficiary, such as retirement savings accounts and annuities.)
Check out who the successor trustees and trustees are, what sequence you are supposed to act in, and if you will act alone or alongside somebody else.
When you take over as trustee, keep in mind that they are not your possessions. You are preserving them for the benefit of the grantor (if alive) and their heirs, who will inherit them upon the grantor’s passing.
The guidelines in the trust declaration must be adhered to by you as a trustee:
No, experts are available to assist, particularly with investing and bookkeeping. You might need to speak with a lawyer as well. Nonetheless, the beneficiaries will eventually hold you accountable for the careful administration of the trust’s assets in your capacity as trustee.
The trust instrument will usually contain instructions on how to determine whether the grantor is disabled. One or more doctors may need to certify that the grantor is either mentally or physically unable to manage their financial affairs.
You can assume the role of trustee and oversee the grantor’s financial operations without the involvement of the court if any belongings have been moved to the trust.
If the grantor is rendered unable, the trustee will:
You may now begin doing any essential business, such as receiving and depositing money, paying bills, and generally using the grantor’s assets to support them and those who depend on them until they pass away or recover.
Keep full records of all medical expenses. File all claims promptly. Keep track of the money you have been paid and the bills you have paid. You can learn how to correctly put up these records from an accountant.
What does a trustee do? Trustees must maintain accurate records & invest prudently.
You can be required under the trust to provide the beneficiaries with accountings. Remember property taxes and income taxes as well.
You return to the role of successor trustee or co-trustee. The grantor goes back to managing their own finances. Nothing from the court is involved.
As a trustee in this case, do the following:
The trust has now been essentially dissolved.
A fresh tax identification number is required for each trust if the assets are to remain in the trust (for a surviving spouse, minors, taxation reasons, or if the recipients will get the assets in installments). Adequate bookkeeping and reporting will have to be established.
The trustees are responsible for ensuring that all is done properly and in a timely manner. Remember that an accountant, attorney, & corporate trustee can provide assistance.
Trustees do have a right to fair compensation for their work. Guidelines should be included in the trust document. In the event that this information is missing from the document, the lawyer will base your compensation on the state’s case or applicable statutes.
Think about getting assistance from a lawyer, accountant, bookkeeper, or company trustee. (Investments and record-keeping can be handled by a corporate trustee.)
You are free to leave if you are unable to manage the duties because of obligations to your family, your job, or other factors. Next in line is the replacement trustee. In the scenario that no other replacement trustee is available or willing to serve, a trustee from the company can typically be appointed.
Being named trustee by the grantor does not obligate you to take up the role. You may be asked to sign a form by the lawyer helping with the administration of the trust if you do not want to serve as a trustee. As a result, the subsequent named trustee can take over as acting trustee.
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