What Do Trustees Do?

With trusts becoming increasingly popular for both care and estate planning, more relations and friends will find themselves being asked to serve as trustees. So what exactly does a trustee do? For one thing, a trustee is a fiduciary, with the legal obligation to protect the interests of the trust. Read on to understand more about trustee duties. 

Essential Responsibilities

If a loved one or friend establishes a trust to anchor their estate plan, and asks you to serve as trustee, be mindful that you are taking on an official, legally binding responsibility. At Smart Asset, Ashley Kilroy explains that as a fiduciary, “ A trustee must put the interest of the trust above all others,” while carrying out these essential responsibilities:

1. Protect and preserve the trust’s property and assets.
2. Defend all beneficiaries and the trust against legitimacy challenges.
3. Separate the trust’s assets and property from the trustee’s property. Trustees who commingle assets are liable for any losses as a result of combining wealth.
4. Handle all assets with care and attention to detail. Complex assets may require greater attention to detail.
5. When acquiring, selling, managing or investing the trust’s property, the trustee must proceed with caution.

Because they are held to a fiduciary standard, trustees must “pay closer attention to the investments and assets of the trust than to their own accounts,” while carrying out their duties. Depending on the size and nature of the trust, on a day to day basis, the types of  asset and property management obligations a trustee specifically takes on may include:

• Distributions: Some trustees may have discretion when it comes to making distribution decisions. Trustees need to evaluate the beneficiaries’ needs, other sources of income and responsibilities to the other beneficiaries. Often, the trustee must set limitations and boundaries on the use of all trust assets.
• Taxes: Depending on the type of trust, the trustee must file tax returns and pay any tax obligations….
• Delegation: Although you cannot delegate your trustee obligations, you can delegate some tasks. For instance, the trust may allow you to hire financial advisors to handle wealth management, accountants to manage bookkeeping and lawyers to advise the interpretation of trust guidelines.
• Record Keeping: A trustee must keep impeccable records of all the happenings related to their duties and responsibilities. Good record keeping should include keeping a detailed list of all assets received and spent, as well as receipts and documentation of all trust expenses. 

Attorneys at Frank & Kraft caution that it is important to take trustee appointments seriously. Common mistakes associated with overseeing a trust include:

• Failure to follow the trust’s terms: If the Trustee does not distribute assets according to the trust’s instructions, beneficiaries may have grounds to hold the Trustee accountable.
• Overlooking debts or taxes owed by the trust: Failing to pay debts or taxes in a timely manner could lead to fines or penalties that diminish the trust’s value.
• Making high-risk investments: Trustees are generally expected to make conservative investment choices, focusing on asset preservation. Risky investments that result in financial loss can make the Trustee liable.
• Lack of communication: Failing to keep beneficiaries informed about significant trust matters may cause issues and result in personal liability for the Trustee.
• Conflict of interest: If the Trustee’s actions benefit their own interests over the trust’s, this “self-dealing” could result in significant liability.

Trustees, or those considering the role, will find it helpful to know that they can obtain professional assistance, such as legal, financial or investment expertise, and the expenses, as long as reasonable vis a vis the nature of the trust, can be charged to the trust.  Some families even choose to designate a professional trustee, either as the sole trustee, or in tandem with a friend or relation. The appointment of a neutral, experienced, professional fiduciary to administer a trust makes especially good sense if conflicts or disagreements or other complications are a possibility. For those aging solo, the services of a professional fiduciary can also be very reassuring. 

Given the significant responsibilities of trustees, a type of bond, referred to as a fiduciary or trustee bond is frequently required. Essentially, fiduciary and trustee bonds serve as a guarantee that duties will be carried out in accordance with the law and in the best interests of beneficiaries. Colonial Surety Company makes it easy and speedy for fiduciaries and trustees in every state to obtain their bonds: simply: get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere.

Trustee and Fiduciary Bonds Here

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In addition to providing fiduciary and court bonds directly to the general public, Colonial Surety Company offers The Partnership Account® for Attorneys. This free business service enables attorneys across the country to easily obtain, coordinate, and e-file the court and fiduciary bonds clients need, directly from a private dashboard. Sign up today so that easy, speedy bonds for all your clients are just a few clicks away whenever you need them:

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