Being appointed the trustee of a trust can be overwhelming at first and can often leave one with more questions than answers: What exactly is a trust? What are my responsibilities? What are my limitations?
A trust is an arrangement in which an individual, the trustee, is appointed to manage the property of another individual, also known as a beneficiary. Being appointed the trustee is flattering but also a huge responsibility. Here are some basic rules to follow to successfully carry out the responsibilities associated with being a trustee.
- Read the trust in its entirety. It will set clear guidelines and contain information regarding different issues, such as beneficiaries and distribution.
- Create a trust checking account. This will help you keep track of income and expenses.
- Always consider the interests of the beneficiaries. A trustee’s fiduciary role requires that you pay attention to how trust investments and payouts will affect the beneficiaries.
- Keep your personal finances out of it. You should never borrow nor lend money from the trust in the chance that you may not be able to put back whatever amount you took out.
- Provide beneficiaries with an account of trust activity. Such documentation can be a simple checking statement or a formal trust account prepared by an attorney. These should be provided annually.
- Invest the funds carefully. It’s not enough to leave the funds sitting in a savings account. On the reverse side, you cannot invest all the money in one area. There are a set of investment standards that must be followed which require that the investments be diversified and non-risk oriented. They also must consider the future financial needs of the beneficiaries.
- Keep in contact with the beneficiaries. This is crucial to make sure you understand their needs and any possible future needs.
- Be aware of outside factors. Make sure you know of any other benefits the beneficiaries are receiving to ensure you do not compromise their eligibility.
- File annual trust income tax returns. The trustee may have to pay taxes. If you keep thorough records then this should be easy!
The last piece of advice is a “don’t”- don’t do it alone! Get professional advice to make sure you are correctly fulfilling your role. Adam Tobin is an experienced living trust attorney and can help you carry out these responsibilities. Contact him today for a free consultation.