What Are the Duties of a Trustee?
The Trustee acts as the legal owner of trust assets and is responsible for handling any of the assets held in the trust, tax filings for the trust, and distributing the assets according to the terms of the trust. For our clients who have set up a Living Trust, you are the Trustee of your own Living Trust (and if you're married, you are Co-Trustees together with your spouse until one person becomes incapacitated or passes away).
The duties and responsibilities of a Trustee are to manage the assets that are inside the Living Trust. Most people choose to be their own Trustees and continue to manage their affairs for as long as they are able to do so. It effectively will be "business as usual" until someone is no longer able to manage the assets on their own and requires assistance.
This is when a Successor Trustee comes in to help.
Duties of a Successor Trustee
A Successor Trustee is named to step in and manage the Living Trust assets when the Trustee is no longer able to do so (usually due to incapacity or death). Typically, several individuals are named in succession in case one or more Trustees named are not able (or choose not to) act. Some people choose to name multiple Successor Trustees to act together (as Co-Trustees), such as adult children. There can be a lot of issues that may arise when two or more are named to act together, particularly if there's a disagreement about the way something should be managed. Also, some clients name a Corporate Trustee (like a bank or trust company) to serve as Trustee. This can be helpful in having a neutral third-party serve and help manage the assets without the conflicts that can happen when it involves family members and siblings.
What a Trustee Can and Cannot Do
Below are just a few of the primary responsibilities of a Trustee:
- You are safeguarding the assets for others (for the trust maker, if living, and for the beneficiaries, who will receive them after the trust maker dies).
- You must follow the instructions in the provisions and instructions as laid out in the Living Trust document.
- You cannot (and should not) mix trust assets with your own. You must keep separate checking accounts and investments.
- You cannot use trust assets for your own benefit (unless the provisions of the Living Trust authorize you to do so).
- The Living Trust assets must be invested in a prudent and conservative manner, in a way that will result in reasonable growth with minimum risk.
- You must treat the trust beneficiaries equally and respectfully (you cannot favor one over another).
- You are responsible for keeping accurate accounting records, filing tax returns in a timely fashion, and providing proper reporting to the beneficiaries as the trust requires.
It is important to add here that you are not required to serve as Trustee; however, while it might seem like a difficult task to take on, this is where we can help. I am in the process of putting together a new Successor Trustee Manual, which will be a plain-English guide for my clients and their Successor Trustees, so they'll know what to do when the time comes. This Manual will include a checklist of action items to do when the trust maker becomes incapacitated or passes away, along with practical guidance to help you and your Successor Trustee navigate the process of serving as Trustee.Also, we are looking to hold a series of special seminars (or online webinars right now during the pandemic) just for our clients and their Successor Trustees. This would be a great presentation to attend with your Successor Trustees - - wherever they may be living - - so that they can feel better prepared when the time comes.
Contact us at (925) 208-4543 or send us an e-mail and we will be sure to notify you when our next Successor Trustee Seminar is being held.