When a trust is created, one or more trustees must be appointed to administer it. Far from being an honorary role, a trustee is obligated to manage the trust in accordance with the terms of the trust agreement–and the law. Trustee accountability includes regular communication with beneficiaries about the status of funds.
Complete and Accurate Accounting
Specifics about how trustees administer the assets placed in a trust, including how the assets are ultimately passed to beneficiaries are detailed in trust agreements–and the more detailed, the better. Above and beyond the trust specifics, however, trustees have fiduciary obligations and are held to exceptionally high legal standards. For example, trustees have the duty of disclosure, which includes “the complete and accurate accounting of the trust’s administration on demand.” State laws provide further specifications about what a trustee accounting must include. For example, a trustee accounting in Texas must show these five things “from either the period when the trust was created or since the last accounting, whichever is later”:
1) all assets that belong to the trust (whether in the trustee’s possession or not);
2) all receipts, disbursements, and other transactions including their source and nature, with receipts of principal and interest shown separately;
3) listing of all property being administered;
4) cash balance on hand and the name and location of the depository where the balance is maintained; and
5) all known liabilities owed by the trust. Tex. Prop. Code § 113.152. The accounting must provide these items
Given the seriousness of their responsibilities, trustee bonds are frequently required of trustees. 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 makes it easy and efficient to obtain trustee bonds in every state: Just get a quote online, fill out the information, and enter a payment method. Then, simply print or e-file the bond.
Good To Know: Trustee Failures?
As fiduciaries, trustees are liable for shortcomings in their duties–including failure to keep proper records:
A trustee who fails to keep proper records is liable for any loss or expense resulting from that failure. A trustee’s failure to maintain necessary books and records may also cause a court in reviewing a judicial accounting to resolve doubts against the trustee. These failures by trustees may furnish grounds for reducing or denying compensation, or even for removal, or for charging the trustee with the costs of corrective procedures or of having to conduct otherwise unnecessary accounting proceedings in court.
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