What Are Your Duties as a Trustee?
The number of people reporting some sort of estate planning has decreased by more than 20 percent in the last few years, according to an annual survey conducted by Caring.com, a leading assisted living and homecare referer.
So it's no surprise that many people are unfamiliar with the trust process and trustee duties.
One of the most important reasons to set up a trust is to guarantee that your children will receive their inheritance free from excessive estate taxes, long probate times, and protected from creditors.
In the following article, we will discuss the nature of trusts and the responsibilities and duties of a trustee — the person who manages a trust.
Trusts and Trustee Duties
A trust is a legal condition or entity that can own and possess assets. A trust is like a will, except a last will also names guardians for your children, states your final wishes, and determines your estate's executor.
A trust focuses on your financial holdings and assets and can be distributed during your lifetime if you become incapacitated.
Trusts, or contracts the dictate that one person takes care of another, are managed by a trustee. This trustee has some unique responsibilities under the law.
Once the trustee takes up the trust invitation from the settlor, they cannot then decide not to do the job. Unless all the benefactors agree or the court removes them, the trustee has to fulfill their duties. Also, the trustee has a fiduciary duty to act in the beneficiaries' best interests. The trustee can find themselves in legal difficulties if wrongdoing is alleged.
In general terms, the primary duties of a trustee fall under three headings —investment, administration, and distribution. With those broad strokes in mind, here are a few specific responsibilities:
Carry out the trust according to the contract's wording
Not delegate the trust's duties to another party, unless the trust permits
Manage the assets of the trust with some degree of competence
Act in the best interests of the beneficiaries
Preserve and protect the trust to the best of their abilities
Keep the trust separate from the trustee's assets
Make the trust as productive as possible for the betterment of the beneficiary
Being appointed a trustee involves several important responsibilities.
Investment and Distribution
The trustee usually possesses some fiscal wherewithal. However, the management of a trust's assets does not have to be complicated. A trustee can manage the money themselves or seek a brokerage to help invest the assets.
A trust account with a brokerage firm typically looks like any other investment account with stocks, mutual funds, real-estate investment accounts, etc.
The distribution of a trust's assets is usually outlined in the contract. For example, the beneficiary might receive a percentage annually of the trust's worth. Or the beneficiary may receive a lump sum, say 50% when they reach 25 or 30 years of age.
The trust may also have language that allows for discretionary payments to the beneficiary if the trustee deems the reason for distribution appropriate.
A Unique Responsibility
There are so many reasons to set up a trust and designate a reliable trustee. Protecting your assets, providing for your children longterm, and keeping creditors away from your wealth are just a few of them.
And if you accept the invitation to become a trustee, remember that your trustee duties come with great responsibilities.
Are you ready for estate planning or to set up a trust? Contact us here today.
