Estate planning involves a lot of important decisions, but few are as critical—or as challenging—as choosing a trustee. While it might seem like a simple ceremonial honor, the reality is that this appointment comes with significant responsibilities. A trustee is a fiduciary, legally and ethically bound to manage your assets in the best interest of your beneficiaries. This post will walk you through the key factors to consider, and explain how a Trustee Bond can serve as an added layer of protection.
The Role and Responsibilities of a Trustee
Choosing the right person to administer your trust is not about playing favorites among relations and friends; it’s about practical considerations. A trustee is tasked with a wide range of duties that require a specific set of skills and a significant time commitment. The more complex the assets placed in a trust, the more complex the duties of the trustee become. Similarly, a trustee can expect added gravitas with the role in the event the beneficiaries have special needs or are experiencing capacity declines. In general, trustees can expect their responsibilities to include:
- Managing and investing assets: A trustee must handle the trust’s investments prudently to ensure the portfolio grows and provides for the beneficiaries.
- Following trust instructions: They must strictly adhere to the terms and conditions outlined in the trust document.
- Distributing assets: A trustee is responsible for making timely and appropriate distributions to the beneficiaries as directed by the trust.
- Record keeping and tax filings: They must maintain meticulous records and ensure all necessary tax returns are filed correctly and on time.
Because the role of trustee can be demanding, it’s crucial to select a trustee who has the time, integrity, and financial acumen to handle the responsibilities. At Captrust, Kathleen M. Sablone observes that ultimately “Your choice of trustee is a personal decision, and there is no one right answer for everyone,” and offers these considerations when designating a trustee:
- Your trustee holds legal title to the assets in your trust and has a responsibility to act in the best interests of the trust beneficiaries. They must follow the instructions in the trust document as well as the rules laid out by state and federal laws.
- A family member or friend may be more likely to understand your wishes and family dynamics…..At the same time, they may lack the skills to carry out this role. If there are disagreements between the trustee and the beneficiaries, family relationships can be strained.
- A corporate or professional trustee will have the expertise to manage the trust….They can deal objectively and unemotionally with the beneficiaries. A corporate trustee will not die, which provides continuity. A corporate trustee may charge a fee, while a family member may not. Furthermore, the trustee may…act more conservatively than you would have intended.
When weighing the possibilities, it is helpful to know that you can appoint more than one trustee, and sometimes a combo of familial and professional trustees can make good sense. You can even designate successor trustees. If you do opt for multiple trustees, keep in mind Sablone’s related advice:
Pay attention to some of the provisions in your trust that relate to your trustees. You may think some of the sections in the back of the trust are unimportant or are standard, boilerplate language, but these sections can have significant consequences. Read them and know what they entail. You should review who has the power to remove trustees and appoint successors after your death. If you have multiple trustees, the trust should specify how decisions are made when trustees disagree. If you do choose a family member or friend, the trust should give that individual the authority to hire professionals to assist them.
Practical Advice: Trustee Bonds
Trustees have fiduciary obligations and are held to exceptionally high legal standards, “the most important of which are the duties of loyalty and care, and the duty to act in accordance with the terms of the trust agreement.” Given the seriousness of the role, trustee bonds are often required as an added protection for the trust. Essentially, a trustee bond is a specific type of fiduciary bond that protects the interests of the trust and its beneficiaries in accordance with applicable state law. As a leading national provider of many types of fiduciary bonds, Colonial Surety Company makes it easy and efficient to obtain trustee bonds: Just get a quote online, fill out the information, and enter a payment method. Then, simply print or e-file the bond from anywhere.
Trust Law? Professional Trustee?
Speed things up whenever and wherever a bond is needed. Just log in to The Partnership Account® for Attorneys, choose a bond, send it to your client for payment, then download, e-file or print the bond. Specific obligee requirements? Trust us: Colonial’s a direct bond writer, so our experts are here to ensure obligee requirements across the country are properly met.
Our fiduciary bond portfolio includes: administrator, estate, executor, guardian, personal representative, probate, surrogate, trustee, conservator and the list goes on. Our court bond portfolio includes appeal, supersedeas, injunction, replevin, receiver and more.
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