Updated on September 11th, 2023
What Does A Trustee Do?
The trustee acts as the legal owner of trust assets and is responsible for managing the trust’s assets, distributing the assets to beneficiaries, and filing tax returns.
By Brad Nakase, Attorney
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What Are the Duties of a Trustee?
Trustees are responsible for managing and holding the assets of a trust and distributing assets according to the terms of the trust to the beneficiaries. Therefore, a trustee has a fiduciary duty to act on behalf of the beneficiaries and in their best interests.
For example, many couples elect to place some of their assets into a revocable living trust, so they can commence estate planning.
This lawful agreement sometimes includes the power of attorney and last will and testament. These inclusions often add closure and reassurance for loved ones.
When people are still alive, they usually choose to be the trustee of their living trusts. However, individuals must also plan for their passing, as death is a part of life. When a grantor passes on, a new trustee will begin overseeing the Trust and all that comes with it.
The key for those entering into a living trust is to ensure that the eventual trustee accepts their responsibility and is ready to be appointed when the time comes. Life is unpredictable, and sometimes trustees are called on when they least expect it.
In this article, our business litigation attorney will discuss what a trustee does and their responsibilities.
What is the Responsibility of a Trustee?
Trustees are lawfully responsible for upholding and managing the assets and property of the beneficiary. Accordingly, these assets, properties, or financial holdings are considered part of a trust.
When a beneficiary gives the trustee control, they assume that the trustee will cooperate with all fiduciary duties. In addition, California law details many specific trustee duties. These include:
- Sensibly and rationally managing and investing the assets of the Trust
- Avoiding conflicts of interest among the Trust or beneficiaries
- Legally separating trust property from personal property
- Treating the beneficiaries fairly and equitably
- Pledging loyalty to the Trust’s beneficiaries
- Managing the Trust by the agreed-upon terms
Trustees are under a lot of pressure to accomplish various tasks. However, trustees are normally compensated for their hard work with money taken from the Trust’s assets.
Importantly, trustees cannot overpay themselves.
What is the Difference Between a Trustee and a Beneficiary?
A set of specific California laws ensure that trustees are responsible for beneficiaries and respond to the beneficiaries’ requests quickly.
First, Trustees have a series of vital duties. These include:
- Informing other beneficiaries about requests from other beneficiaries
- Informing the beneficiaries regarding any significant events, good or bad
- Providing regular accounting reports to beneficiaries, scheduled and by request
- Abide by the terms of the Trust for the benefit of beneficiaries
Beneficiaries can request documents or records from the trustee at any point. However, there are limits to how much power beneficiaries can exert. For example, if a beneficiary disagrees with the trustee’s decisions, they can provide feedback. Yet, sometimes the trustee does not follow their suggestions. The beneficiary must pursue legal action to remedy the situation if this occurs.
How Are Conflicts Between Trustees and Beneficiaries Resolved?
When disputes occur between beneficiaries and trustees, they end up in probate court. Sometimes, probate courts hesitate to intervene in the management of the Trust, however.
In this case, the beneficiary must present convincing evidence of the trustee’s mistakes or faults. For example, if the trustee mismanaged investments, the beneficiary could present documented proof of that.
If the evidence is compelling, the beneficiary may earn relief through the court. However, these disputes can quickly grow complicated, whether the fault lies with the beneficiary or the trustee.
When conflicts occur between trustees and beneficiaries, both parties should consult an experienced probate litigation lawyer to strategize the optimal course of action.
Who Has More Power, a Beneficiary or a Trustee?
Trustees distribute assets from the Trust to the beneficiary. Trustees, therefore, agree to act reasonably and in good faith on behalf of the other party. In many ways, trustees are bound to act selflessly by their fiduciary duties.
According to business litigation attorneys in Los Angeles, Beneficiaries are interested in the Trust’s distributions, which are delivered to them by the trustee. Therefore, beneficiaries are specifically named in the document of the Trust, or the Trust’s creator lists their names.
For example, the grantor of the Trust could list “my grandsons” on the trust agreement. This listing would establish a provision that allows all future grandsons to access the Trust, even those the grantor never met.
Individuals can also be beneficiaries and trustees of the same Trust. Family trusts often feature this arrangement because the Trust’s creator often does not want the assets managed by an outsider to the family.
However, playing both roles is a complex challenge. For example, one problem arises when other beneficiaries resent the person’s ability to control distributions, disagree with their decisions, or think they are only out for themselves.
What Happens to a Trust When Someone Dies?
When the beneficiary passes away, the trustee’s responsibilities change. In this event, the beneficiary may also be referred to as the “grantor.”
The trustee has to act on behalf of the beneficiary and in their best interests. When a trust is considered revocable, the creator of the Trust is also a beneficiary. Therefore, the creator, or “grantor,” is also an “initial trustee.”
If the creator cannot carry out their duties anymore, or they pass on, the trustee who has been named successor takes ownership of the Trust. The successor must therefore be loyal to the grantor first and then to the additional beneficiaries.
The trustee’s duties are also passed to the beneficiaries when the creator passes away.
Specific Trustee Duties
More specifically, when the grantor dies, there are several things the new trustee must do. The trustee should:
- Locate and secure the property of the Trust, and make sure all is accounted for
- Take inventory of all of the assets, make a note of it
- Make sure that the trustee has access to the property and is assured control of it
For example, if the grantor owned a house, the trustee must find the deed and make sure they own the title. On the other hand, suppose the grantor had a wealthy savings account. In that case, the trustee must go to the bank and ensure they can access the account when necessary.
Next, the trustee should speak with money managers, tax advisors, and a trusted attorney. The trustee must now pay the Trust’s taxes and invest money on its behalf. The trustee may also have to deal with land appraisals and the management of other valuable assets.
Once the trustees deal with all these tasks, they can begin following the Trust’s policies to deliver assets to the beneficiaries.
Why Contact Nakase Wade?
At Nakase Wade, our California probate litigation lawyers are experienced in dealing with the legal questions that beneficiaries and trustees often ask.
Our lawyers advise trustees and beneficiaries who require legal counsel. As a result, we understand the nature of the trustee and beneficiary relationship and the ramifications of a breach of these duties.
Our skilled, experienced team also understands the complexities of establishing, overseeing, and managing the trust.
When created, trusts typically help to protect the interests of the beneficiary. Likewise, the trustee establishes a respectable reputation.
Most trustees honor their fiduciary duties, and most trusts result in gains for the beneficiaries. However, sometimes trustees violate their fiduciary duties. When this occurs, the harmed party must act quickly and contact a skilled California probate lawyer.
If you have questions about trustee fiduciary duties in California, contact Nakase Wade for a free consultation. Our skilled attorneys are here to protect and defend you and are driven to fight for your interests.
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