A trustee is an appointed person that oversees and manages benefits or property for the benefit of a third party. They are required to make decisions that best serve the beneficiary’s interests and have a fiduciary duty towards them, meaning they must manage their business affairs in the best manner.
Generally, a trustee is any person or organization that holds the legal title of an asset or group of assets for another person, called the grantor. The trustee possesses this title to bring benefit to the beneficiaries. They serve a purpose for that grantor and maintain the account. Furthermore, the trustees are responsible for financially managing and overseeing accounts within a trust.
What Are The Responsibilities of A Trustee?
All trustees have certain guidelines and responsibilities. Trustees typically serve the following duties:
- Serve as a fiduciary: The role of the trustee is to follow the trust and administer the grantor’s wishes.
- Protect all assets: Prevent any mingling of the assets and keep track of the funds and assets within the trust. Know your rights and know the rights of the beneficiaries. Trustees also need to ensure that trust assets are kept separate from other assets.
- Administer the trust: Maintain a record of all of the transactions and distribute assets accordingly.
- File reports: Provide the proper documentation for reporting purposes to the local, state, and federal regulators as needed.
- Make decisions: A trustee will be mandated to make decisions regarding the assets from time to time as circumstances change. Remember that these decisions must be in tune with the grantor’s instructions.
- Invest: Any investable assets must be invested, distributed, or adjusted as necessary per the requirements placed by the grantor.
- Discuss and communicate with beneficiaries: Trustees should start communication with the beneficiaries initially, not wait for contact. Emails, phone calls, or other methods can be utilized to check in.
What Are the Different Types of Trustees?
As mentioned earlier, Investopedia further discusses the different types of trustees there are. Depending on the type of trustee you choose, it is important to assess your situation and determine which will best suit your circumstances. Generally, there are three types of trustees:
- Individual: These are your social circle, and it can consist of family or friends;
- Independent: These are businesses not part of a financial institution specializing in trust fund management. You can research and locate investment advisors, accountants, and administrators at these private businesses to assist you with your financial goals; and
- Institutional: Many enormous financial institutions include trust fund professionals that administer, invest, and manage trusts for their clients. You can seek assistance from these types of financial firms.
How to Choose a Trustee?
According to Investopedia, selecting a trustee is a difficult task, and depending on how you want your assets distributed, you would need to make a decision considering the following considerations:
- Wealth Management or Trust Company: These financial institutions have professionals who will administer the trust to its finest details. The main priority of this sort of business organization is to serve its client’s best interests.
- Friends or Family Members: Sometimes, the best person to serve as the trustee will be in your social circle. But you will need to clarify with them the importance of this task and the duties that attach to it. However, even though you can rely on one of your own, this process may create unforeseen drama or resentment in your family or friends group. This person must be willing to be flexible and able to continue the task as long as trust exists; and
- Trust Attorney or Lawyer: The majority of cases will be handled by a trust attorney. They possess the legal background and know exactly how to administer it. Also, they know the law in your state and provide you with the right counsel on how to proceed in your case. However, if one of your intentions as the grantor is to grow wealth within the trust, a lawyer may not be an investment professional or understand how to manage wealth.
Why Should I Create a Trust?
A trust allows you to manage your property after you pass away for your beneficiaries in the methods you want. If you are unable to create trust, you have to give your property right away to the people you choose to receive it. But, a trustee can hold the property in a trust fund as long as needed. It can be utilized for education or medical care purposes.
For instance, if you want to wait until your beneficiaries reach a certain age or maturity to grant them the property and want the property to be held for future generations, which is crucial if you want to leave property to minor children.
If you fail to create a trust, the child’s guardian can use the inheritance only for the child’s support until the child reaches 18. Once the child reaches the age of 18, then the Guardian has to provide all remaining property to the child to utilize it according to their (child’s) wishes.
Estate matters are meant to be kept private and to avoid the courts. However, if you form a revocable trust and fund it properly, you can also avoid the entire probate process for your estate. You can consult an estate lawyer to guide you on the specifics of your case to obtain more information on this. Disputing these issues is a challenge and an uphill battle. Therefore, if you are facing these issues, reaching out to a professional in the field is strongly recommended.
Each state varies on this topic. For example, Alaska allows you to have both a trust and a probate. Some utilize this option, plan for their estate while they are alive, and distribute property that way. Either way, planning for your estate can be a major advantage for managing your financial affairs before you pass, especially if you have a strong vision about who will receive your property.
Another point to keep in mind is that if you do not name a successor trustee and the trustee dies or becomes incapacitated, a court can select a trustee to manage the trust. Therefore, allowing yourself enough time to plan for this scenario can be useful for the future.
What if You Are Named a Trustee?
Every person who is being appointed as a trustee must fully understand their responsibilities and obligations in this matter. Usually, the grantor will inform you that they choose you as a successor trustee when they create the trust. Although, that is not guaranteed, and you might not find out until they die or become incapacitated.
It is important to understand that you have the legal right to decline. Although someone may be capable of being a trustee, this does not automatically mean they will have the means to fulfill this obligation. They may already have other higher-priority obligations that must be addressed. Additionally, taking on this role can strain their relationship with their family members.
When Do I Need to Contact a Lawyer?
If you have been named trustee or are considering appointing someone as a trustee, you need to reach out to a local trust attorney to navigate you through this process and grant you assistance with it.
Being a trustee is a high-priority obligation; therefore, serving the grantor’s best interests in financial matters will be critical.