A trustee is an individual who administers assets or property on behalf of a grantor for third parties. A trustee could be appointed in a bankruptcy case for a charity or retirement plan, but the most common appointment of a trustee is to manage a trust.
A trust is a legal agreement that dictates how an estate is passed on to heirs. A trust is often created to safeguard a beneficiary's interest. Do not confuse a trustee with a trustor or grantor which is the person who appoints a trustee to fulfill the trust's wishes.
A trustee's duties vary depending on the type of assets in the trust and the specific trust agreement. Duties may include filing taxes for the trust and distributing assets under the trust's guidelines.
The grantor may appoint a trustee if the person is 18 years old and not likely to become bankrupt or mentally disabled. In revocable living trusts, grantors can also serve as trustees. Let's explore this further below.
Who Are the Parties of a Trust?
The trust you create to protect, grow, and distribute your assets involves many parties. There is a difference in roles and responsibilities between these parties. A trust will only function if all parties involved are doing their jobs. Which parties are relevant to a trust?
- Grantor: A settlor, trustee, or donor is the person, couple, or entity that owns the assets in a trust. Assets such as antiques, art, investments, real estate, savings accounts, and vehicles can be placed into trusts. The grantor must name a specific beneficiary of the trust assets.
- Beneficiary: The beneficiary is the person, people, or organization who benefits from the trust assets. Their benefit is the primary purpose of the trust. As a fiduciary, the trustee manages the trust for this purpose.
- Trustee: The person designated to control the trust's assets. The trustee can have much control over the assets depending on the trust's nature. To benefit the beneficiaries, trustees have a fiduciary duty to manage estate assets. The trustee must demonstrate that they act in the trust's best interest by constantly striving to grow assets. In the event they fail to comply, they may be personally liable.
- Successor Trustee: While still alive, some grantors name themselves trustees for their trusts. A successor trustee takes over when the original trustee (grantor) dies. It is also possible to name a successor trustee if the original trustee cannot fulfill their duties. Successor Trustees play the same role as regular Trustees in either scenario.
- Trust Protector: They protect trusts, as you might expect. The purpose of trust protectors was originally tax-related. However, various socioeconomic groups use them in many trusts. They MUST be drafted properly to cope with the continuously changing and unpredictable landscape of taxes, law, family dynamics, and economic conditions.
Key Duties of a Trustee
Trusts are established to protect your legacy, and the primary responsibility of a trustee is to fulfill the directions of the trust. A trustee may be required to do any of the following tasks:
- Understand the trust's terms and ensure the assets are safe: Trust assets must remain secure, so the trustee must understand the basic rules of the trust. They need to know who all the beneficiaries are and have access to all the records to ensure they are accurate and in order.
- Make investments: A Trustee should invest assets based on the trust's directions to preserve assets now and in the future.
- Trust administration: The trustee is responsible for distributing or administering assets to beneficiaries based on the trust's directions.
- Continuously make decisions: Trustees should be able and willing to decide how and when beneficiaries receive payments and other trust provisions. In these decisions, trustees exercise discretionary powers.
- Prepare tax-related forms and filings: Trustees must keep financial records and statements organized along with tax returns.
- Respond to beneficiaries' questions as necessary: It may include statements, account information, and tax reports. Over time, the duties of a Trustee may also change.
What Makes a Good Trustee?
Any Trust Agreement relies heavily on the trustee. In selecting a trustee, the following qualities are most important:
- Honesty
- Stability
- Dependability
- Organization
- Financial experience
- An impartial commitment to the interests of all beneficiaries
Can A Trustee Delegate Duties?
The Uniform Trust Code codifies much of the common law on trusts. According to the Uniform Trust Code, a trustee may delegate duties and powers. The Uniform Prudent Investor Act Section 9 states that an agent should be chosen with care, skill, and caution to perform investment and management functions.
Delegation can, under appropriate circumstances, apply to the selection of trust investments, the management of specialized investment programs, or other activities involving significant judgment on the part of the administration.
In addition, section 807(c) of the Uniform Trust Code provides that as long as a trustee complies strictly with subsection (a) of the code, they are not liable to the beneficiaries or the trust.
Further, the trustee must personally formulate or approve the trust's investment strategies or approve the trust's investment programs. The trustee must exercise realistic care, skill, and caution in choosing who will handle the trust's investment responsibilities.
Successor Trustee Duties
Successor Trustees administer and settle a trust after the grantor (or creator) dies. If a grantor becomes incapacitated or incapable of making decisions, a successor trustee is responsible for the trust.
Successor trustees will have different responsibilities depending on the grantor's instructions.
Revocable living trusts particularly benefit from the successor trustee. Initially, the grantor acts as the trustee of a living trust until their death, but they will eventually need a successor. Successful successor trustees can be close relatives, friends, or financial institutions.
Grantors name their Successor Trustee in a document called a Declaration of Trust, which also explains their role.
Get Your Revocable Living Trust Here
What Are the Fiduciary Duties of a Trustee?
A trustee with a fiduciary duty must act to benefit that person financially. They must account for the ill-gotten profit if he breaches his duties. Damages are usually payable to beneficiaries. Trustee duties relate to the management of the trust under the law. Loyalty is the most important duty.
Trustee legal ownership prevents the trustee from exploiting the legal ownership for his benefit, violating the duty of loyalty. To act in good faith and to make prudent investments, the trustee must act in good faith.
Helpful Resources:
Trust Code - Uniform Law Commission
A trustee is an individual who administers assets or property on behalf of a grantor for third parties. A trustee could be appointed in a bankruptcy case for a charity or retirement plan, but the most common appointment of a trustee is to manage a trust.
A trust is a legal agreement that dictates how an estate is passed on to heirs. A trust is often created to safeguard a beneficiary's interest. Do not confuse a trustee with a trustor or grantor which is the person who appoints a trustee to fulfill the trust's wishes.
A trustee's duties vary depending on the type of assets in the trust and the specific trust agreement. Duties may include filing taxes for the trust and distributing assets under the trust's guidelines.
The grantor may appoint a trustee if the person is 18 years old and not likely to become bankrupt or mentally disabled. In revocable living trusts, grantors can also serve as trustees. Let's explore this further below.
Who Are the Parties of a Trust?
The trust you create to protect, grow, and distribute your assets involves many parties. There is a difference in roles and responsibilities between these parties. A trust will only function if all parties involved are doing their jobs. Which parties are relevant to a trust?
- Grantor: A settlor, trustee, or donor is the person, couple, or entity that owns the assets in a trust. Assets such as antiques, art, investments, real estate, savings accounts, and vehicles can be placed into trusts. The grantor must name a specific beneficiary of the trust assets.
- Beneficiary: The beneficiary is the person, people, or organization who benefits from the trust assets. Their benefit is the primary purpose of the trust. As a fiduciary, the trustee manages the trust for this purpose.
- Trustee: The person designated to control the trust's assets. The trustee can have much control over the assets depending on the trust's nature. To benefit the beneficiaries, trustees have a fiduciary duty to manage estate assets. The trustee must demonstrate that they act in the trust's best interest by constantly striving to grow assets. In the event they fail to comply, they may be personally liable.
- Successor Trustee: While still alive, some grantors name themselves trustees for their trusts. A successor trustee takes over when the original trustee (grantor) dies. It is also possible to name a successor trustee if the original trustee cannot fulfill their duties. Successor Trustees play the same role as regular Trustees in either scenario.
- Trust Protector: They protect trusts, as you might expect. The purpose of trust protectors was originally tax-related. However, various socioeconomic groups use them in many trusts. They MUST be drafted properly to cope with the continuously changing and unpredictable landscape of taxes, law, family dynamics, and economic conditions.
Key Duties of a Trustee
Trusts are established to protect your legacy, and the primary responsibility of a trustee is to fulfill the directions of the trust. A trustee may be required to do any of the following tasks:
- Understand the trust's terms and ensure the assets are safe: Trust assets must remain secure, so the trustee must understand the basic rules of the trust. They need to know who all the beneficiaries are and have access to all the records to ensure they are accurate and in order.
- Make investments: A Trustee should invest assets based on the trust's directions to preserve assets now and in the future.
- Trust administration: The trustee is responsible for distributing or administering assets to beneficiaries based on the trust's directions.
- Continuously make decisions: Trustees should be able and willing to decide how and when beneficiaries receive payments and other trust provisions. In these decisions, trustees exercise discretionary powers.
- Prepare tax-related forms and filings: Trustees must keep financial records and statements organized along with tax returns.
- Respond to beneficiaries' questions as necessary: It may include statements, account information, and tax reports. Over time, the duties of a Trustee may also change.
What Makes a Good Trustee?
Any Trust Agreement relies heavily on the trustee. In selecting a trustee, the following qualities are most important:
- Honesty
- Stability
- Dependability
- Organization
- Financial experience
- An impartial commitment to the interests of all beneficiaries
Can A Trustee Delegate Duties?
The Uniform Trust Code codifies much of the common law on trusts. According to the Uniform Trust Code, a trustee may delegate duties and powers. The Uniform Prudent Investor Act Section 9 states that an agent should be chosen with care, skill, and caution to perform investment and management functions.
Delegation can, under appropriate circumstances, apply to the selection of trust investments, the management of specialized investment programs, or other activities involving significant judgment on the part of the administration.
In addition, section 807(c) of the Uniform Trust Code provides that as long as a trustee complies strictly with subsection (a) of the code, they are not liable to the beneficiaries or the trust.
Further, the trustee must personally formulate or approve the trust's investment strategies or approve the trust's investment programs. The trustee must exercise realistic care, skill, and caution in choosing who will handle the trust's investment responsibilities.
Successor Trustee Duties
Successor Trustees administer and settle a trust after the grantor (or creator) dies. If a grantor becomes incapacitated or incapable of making decisions, a successor trustee is responsible for the trust.
Successor trustees will have different responsibilities depending on the grantor's instructions.
Revocable living trusts particularly benefit from the successor trustee. Initially, the grantor acts as the trustee of a living trust until their death, but they will eventually need a successor. Successful successor trustees can be close relatives, friends, or financial institutions.
Grantors name their Successor Trustee in a document called a Declaration of Trust, which also explains their role.
Get Your Revocable Living Trust Here
What Are the Fiduciary Duties of a Trustee?
A trustee with a fiduciary duty must act to benefit that person financially. They must account for the ill-gotten profit if he breaches his duties. Damages are usually payable to beneficiaries. Trustee duties relate to the management of the trust under the law. Loyalty is the most important duty.
Trustee legal ownership prevents the trustee from exploiting the legal ownership for his benefit, violating the duty of loyalty. To act in good faith and to make prudent investments, the trustee must act in good faith.
Helpful Resources:
Trust Code - Uniform Law Commission
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