Things to Know Before Naming a Trustee
A Trustee is the fiduciary put in charge of overseeing the day to day management of property owned by a trust. A Trustee can be an individual, an institution, such as a bank or trust company, or a combination of both.
A Trustee is responsible for managing all of the property owned by a trust for the benefit of the trust beneficiaries. The exact duties of a Trustee will vary based on what assets are owned by the trust.
For example, if the trust consists of bank and investment accounts, then the Trustee will be responsible for overseeing these accounts. Or, if the trust owns rental real estate, then the Trustee will be responsible for managing the rental property.
The Trustee can, depending on state law and the terms of the trust agreement, delegate certain duties to others, such as hiring a financial advisor to oversee investments or hiring a property manager to oversee rental real estate. But the Trustee must use good judgment and due diligence when delegating duties and must also avoid any conflicts of interest (such as hiring a sibling as the trust's investment advisor) unless the beneficiaries consent.
When administering the trust, a Trustee must set aside personal feelings and goals and instead do what is in the best interests of the trust beneficiaries - this is referred to as the Trustee's "fiduciary duty." A well drafted trust agreement will give the Trustee guidance about what the priorities should be for each beneficiary.
For example, a trust for the benefit of a surviving spouse and children could state that the spouse's needs have priority over the children's needs, or vice versa. Or a trust that has been set up to provide for the education of grandchildren could specify what types of schools the grandchildren can attend (public, parochial, trade, state funded, private) and what will be paid for from the trust fund (tuition, room, board, books). A trust may also require the Trustee to look at other assets available to the beneficiary outside of the trust fund before making distributions to the beneficiary.
If the trust agreement does not contain any specific guidelines (unfortunately, many older trusts that I run into do not), then the Trustee must look for guidance from state law and may even require the assistance of a judge to make the right decision in certain situations.
What Does a Trustee Do?
A Trustee is responsible for managing all of the property owned by a trust for the benefit of the trust beneficiaries. The exact duties of a Trustee will vary based on what assets are owned by the trust.
For example, if the trust consists of bank and investment accounts, then the Trustee will be responsible for overseeing these accounts. Or, if the trust owns rental real estate, then the Trustee will be responsible for managing the rental property.
The Trustee can, depending on state law and the terms of the trust agreement, delegate certain duties to others, such as hiring a financial advisor to oversee investments or hiring a property manager to oversee rental real estate. But the Trustee must use good judgment and due diligence when delegating duties and must also avoid any conflicts of interest (such as hiring a sibling as the trust's investment advisor) unless the beneficiaries consent.
Understanding a Trustee's Fiduciary Duty
When administering the trust, a Trustee must set aside personal feelings and goals and instead do what is in the best interests of the trust beneficiaries - this is referred to as the Trustee's "fiduciary duty." A well drafted trust agreement will give the Trustee guidance about what the priorities should be for each beneficiary.
For example, a trust for the benefit of a surviving spouse and children could state that the spouse's needs have priority over the children's needs, or vice versa. Or a trust that has been set up to provide for the education of grandchildren could specify what types of schools the grandchildren can attend (public, parochial, trade, state funded, private) and what will be paid for from the trust fund (tuition, room, board, books). A trust may also require the Trustee to look at other assets available to the beneficiary outside of the trust fund before making distributions to the beneficiary.
If the trust agreement does not contain any specific guidelines (unfortunately, many older trusts that I run into do not), then the Trustee must look for guidance from state law and may even require the assistance of a judge to make the right decision in certain situations.
