At some point, you may decide to incorporate a trust into your comprehensive estate plan to help you achieve one (or more) of your estate planning goals. If so, one of the most important steps in creating your trust will be to choose someone to be the Trustee. Unfortunately, people often realize after the fact that they chose the wrong person as their Trustee. To help ensure that you don’t make the wrong choice, a trust administration attorney at Nash Bean Ford & Brown, LLP explains what is required of a Trustee.
What Is a Trust?
A trust is a separate legal entity that owns and holds property for the benefit of one or more beneficiaries. A trust is created by a Settlor, also referred to as a Grantor, Trustor, or Maker, who transfers property to a Trustee appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries. All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust, as the name implies, does activate during the Settlor’s lifetime.
What Does a Trustee Do?
As is the case filling just about any job, they key to choosing the right Trustee for a trust can be found in a clear understanding of the job requirements. In general, a Trustee is responsible for administering the trust. Some common things a Trustee might be required to do include:
- Understanding and abiding by the trust agreement. A “trust agreement” is the legal document created when a trust is established. The terms of the trust agreement govern the administration of the trust and must be followed by the Trustee as they are written unless a term is illegal, impossible, or unconscionable.
- Legal and/or financial experience. While not legally require of a Trustee, having legal and/or financial experience is extremely beneficial to a Trustee. A Trustee must understand and abide by the laws that govern trust administration which much easier to do with a legal background. By the same token, a Trustee must manage and invest the trust assets which is easier to do well if the Trustee has a financial background.
- Record keeping. A trust is a separate legal entity. As such, the trust needs a separate bank account that will be used to pay trust expenses. The Trustee must keep detailed records of all trust business. In addition, the Trustee must pay the trust debts and keep track of debts owed to the trust.
- Communicating with the trust beneficiaries. Trust beneficiaries have a number of rights, including the right to be kept apprised of all important trust business. Often, this is the first time a beneficiary has been involved in a trust, meaning the beneficiaries may be feeling just as overwhelmed and uncertain as the Trustee. In this case, the Trustee’s job requires a bit of “hand holding.”
- Working with a trust administration attorney. Trust administration often involves complex financial strategies as well as requires knowledge of state and federal laws applicable to the trust. Along with dramatically increasing the odds of successfully administering the trust, retaining an attorney also dramatically decreases the likelihood of errors that could lead to personal liability.
With a better concept of the overall job of a Trustee, hopefully you will make the right choice for your trust.
Contact a Trust Administration Attorney
For additional information, please download our FREE estate planning worksheet. If you have additional questions or concerns about a Trustee’s duties and responsibilities, contact an experienced trust administration attorney at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.