If you have been appointed to the position of trustee of a trust, congratulations – clearly you are thought of as someone of great judgment, patience, and honesty. A trust (a legal arrangement in which one person, a trustee, holds the legal title of an entity for another, a beneficiary,) however, is a great responsibility. Here are a few duties of the position:
1. Fiduciary Responsibility – Your actions as trustee must be held to a very high standard. As a fiduciary (someone who holds assets in trust for a beneficiary) you must pay acute attention to the investments and disbursements of the trust.
2. Knowledge of the Trust – You must follow the directions and rules of the trust emphatically. Make sure to read the trust in detail; it is also beneficial to reference the trust when any questions come to light.
3. Standards of Investment – The investments you execute must be prudent and logical; you cannot use money for risky investments. These investments must also take into account the interests not only of current beneficiaries, but future as well. You must consider the future financial needs of the beneficiary.
4. Distribution – Often the most important role of a trustee is the ability to set limits of the use of trust assets. When making distributions to a beneficiary, you are responsible for evaluating his or her future needs before making a decision.
5. Taxing – You will be responsible for filing tax returns and paying any taxes. You must keep good records and can turn over this responsibility to an accountant to ensure this goes smoothly.
6. Accounting – You are in charge of monitoring all income to, distributions from, and expenditures by the trust. Usually an account of this information is given to beneficiaries annually. It is important to report on income and principal separately.
7. Delegation – All above functions can be delegated. You are allowed to hire financial advisors, accountants, and lawyers to ease the burden of responsibility. You cannot, however, delegate your responsibility to the trust; you still must communicate with those that you hire as well as make any discretionary decisions.
8. Delegation. While you cannot delegate your responsibility as trustee, you can delegate all of the functions described above. You can hire financial advisors to make investments, accountants to handle taxes and bookkeeping for the trust, and lawyers to advise you on questions of interpretation. With such professional assistance, the job of trustee need not be difficult. However, you still need to communicate with those you hire and make any discretionary decisions, such as when to make distributions of principal from the trust to one or more beneficiaries.
Acting as a trustee is an opportunity to enhance the lives of the trust’s beneficiaries, and also a great responsibility. You don’t have to 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.