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Understanding What Your Trustee Tin – and Cannot – Do

Introduction

In recent years, many individuals have elected to incorporate a trust into their estate plan. Although wills and trusts are common documents found in many estate plans, the 2 documents are a world apart. Whereas a will operates to transfer belongings upon your death, the bones living trust is its own legal entity to which you transfer property during your lifetime. During your lifetime, the holding of the trust is used to run across the needs of y'all and your family. Upon your death, the trust continues to exist and the assets it holds are either distributed to your named beneficiaries or are used to run across the ongoing needs and expenses of your beneficiaries. A trust is overseen past 1 or more trustees whose job it is (generally speaking) to manage the trust and utilize its avails in such a way so equally to provide the maximum benefit to the beneficiaries of the trust. In lodge to reach this chore, trustees are given certain powers and responsibilities. These powers and responsibilities are constrained past ethical obligations.

Meet the Trustee

A trustee tin be any individual who is of audio heed and who is over the age of 18 years. In many living trusts, the grantor (the person who initially creates the trust) names him- or herself as trustee. This allows him or her to manage his or her avails (which are put into the proper noun of the trust every bit if the trust owns them) equally he or she sees fit during his or her lifetime. If the grantor/trustee is married, he or she may name his or her spouse as either a co-trustee – in which case he or she and his or her spouse will brand trust-related decisions together – or as the successor trustee – in which example the spouse will presume the duties of trustee over the trust upon the grantor'south death. The trust may name whatever number of successor trustees and it may in theory name as many co-trustees at one time equally the grantor wishes (as a practical affair, though, there is typically but i and sometimes two trustees at any in one case so that trust business can exist carried out efficiently).

In cases where the grantor does not accept whatsoever family fellow member or trusted relative or friend he or she feels comfortable handling the affairs of the trust, the grantor may appoint a professional person trustee. As the name implies, a professional trustee is a third-party individual or business entity with noesis and experience in handling others' trusts. These individuals or entities can include attorneys, accountants, banking concern officers, and/or financial institutions. There are certain advantages to having a professional person trustee, all the same these advantages usually come with a higher price tag.

Responsibilities and Ethical Obligations of the Trustee

Before discussing the powers that a trustee tin practise, information technology is helpful to know that a trustee occupies a position of trust and responsibleness. One of the most basic responsibilities of the trustee is to read the actual trust certificate and take the time to empathise its contents. While trustees of different trusts may have the same general responsibilities and powers, the grantor of a particular trust is always gratis to limit the power or potency that a trustee would otherwise have. A trustee who exceeds the scope or nature of his or her powers may find him- or herself the named defendant in a lawsuit filed past the trust's beneficiaries.

Some of the other responsibilities placed upon trustees include:

• Keep trust assets separate. A trustee cannot comingle trust assets with whatsoever other avails. This not simply helps the trustee in maintaining an authentic accounting of the trust's assets (see below), but it helps the courtroom and beneficiaries know what property the trust has on hand at whatsoever given moment. Comingling occurs when a trust asset or property is mixed with property belonging to another. For example, suppose that an investment account in the trust's name pays a dividend by check for the profits earned by the business relationship. The trustee receives the check merely does not desire to travel across town to eolith the check with the banking concern that holds the trust's money. Instead, the trustee goes to his or her local bank and deposits the check there. Even if the trustee never uses the funds from the cheque for personal purposes, the trustee has comingled trust assets with non-trust assets.
• Not employ trust property for private gain. If the trustee is not the grantor or a beneficiary, the trustee is not permitted to use the trust property for his or her ain benefit. Of course the trustee should not steal trust assets, merely this responsibleness also encompasses misappropriation of assets. A trustee may not (unless the trust specifically says otherwise) use the antique auto held in the trust's name and held for the do good of the grantor's minor child to take personal trips or run personal errands.
• Treat all beneficiaries the same. Unless the trust specifies that beneficiaries are to exist treated differently from one another (and the trust describes precisely how), the trustee must ensure that all beneficiaries are treated the same. The trustee cannot grant legitimate and reasonable requests from one beneficiary in a timely way and deny or delay granting legitimate and reasonable requests from another beneficiary merely because the trustee does not specially intendance for that beneficiary.
• Invest trust assets in a conservative style. Depending on the trust and its assets, at that place may exist belongings the trustee can invest. The trustee must practise so in a bourgeois manner so every bit to reduce the risk of loss to the beneficiaries. The trustee'south first priority should exist to preserve the value of the trust'due south assets as much every bit possible; after this, the trustee may abound the trust'due south assets through investing in reasonably prophylactic investments. The trustee does not take to guarantee the trust'due south assets against all loss – some loss of value is unavoidable – merely the trustee must non accept unnecessary risks with the trust'due south assets.
• Keep authentic records and brand timely reports. The trustee will need to maintain accurate records and provide periodic reports to the beneficiaries as described in the trust. Not only this, merely beneficiaries are entitled to an accounting of the trust and its assets. This bookkeeping would show the assets owned past the trust as well equally any obligations of the trust and what belongings or assets (if whatever) have been recently distributed. To be able to accomplish this responsibility in an efficient manner, the trustee will need to be highly organized. Anytime property is transferred, distributed, or experiences an increase or decrease in value, the trustee should notation such in the trust'due south official records.

A violation of whatsoever of these duties that results in one or more of the beneficiaries beingness harmed is grounds for the beneficiary or beneficiaries affected to bring a lawsuit against the trustee to seek his or her removal from office.

Powers of the Trustee

In order to fulfill his or her multitude of responsibilities, the trustee is granted sure powers. Typically the trust will set forth the precise powers that the trustee has to carry out his or her office. If the trust is silent on the trustee'due south powers, the trustee is usually presumed to possess those powers reasonably necessary to carry out his or her responsibilities, duties, and upstanding obligations. In exercising their powers, trustees are given some measure of discretion. For example, where investment accounts are part of the trust, the trustee is permitted to invest the avails in the accounts in a reasonable and prudent manner. If the account experiences a decrease in value because the trustee made informed just ultimately bad investing decisions, the obligation would still be on an upset beneficiary to show that the trustee's investment decisions were unreasonable.

Powers that a trustee is generally assumed to have include the ability to:

• Hire any advisors or professionals deemed reasonably necessary to assist the trustee. If the trustee does not feel confident in carrying out any of the responsibilities that the trust imposes on him or her, the trustee is permitted to hire those professionals that the trustee reasonably feels are necessary. This may include hiring attorneys, accountants, investment advisors, and/or other professionals that may be necessary.
• Refuse appointment as a trustee or relinquishment of the trustee position. A trustee named in a trust document has the ability to either pass up his or her appointment as trustee of the trust or give up the position after he or she has accustomed information technology.
• Incur reasonable expenses: The trustee is leap to encounter sure expenses and costs while carrying out the terms of the trust. A trustee is generally permitted to incur reasonable costs related to the trust's administration and may incur these without first seeking the permission of any other individual (unless the trustee is actually a co-trustee, in which example the other co-trustee(s) must agree with the decision according to the terms of the trust.
• Lease and/or sell trust property: If this specific power is not mentioned in the trust agreement, nearly courts throughout the nation volition assume the trustee has such a power. Similar to his or her investment decisions, a trustee may decide whether it is in the beneficiary's ameliorate interests to sell real or personal belongings or lease such property to another. Again, so long as the trustee's decision is reasonable and prudent, the trustee will not exist personally liable for any loss the trust may experience due to a bad decision to sell or invest.

Conclusion

A trustee plays a vital role in a trust – in fact, without a trustee, a trust cannot be administered and beneficiaries cannot enjoy the benefits that are theirs nether the terms of the trust. And so long as a person is over the age of 18 years and is of sound heed at the time of the appointment, a trustee can be simply about anyone. The trustee's position is primarily one of responsibility and obligation. The trustee's actions must be for the benefit of the beneficiary and must be reasonably prudent and cautious. While the trustee is not a guarantor that the trust'south assets volition always maintain their value, the trustee may be sued if the beneficiaries believe that the trustee is not acting in a reasonably careful mode.

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Source: https://estateplanninglegalservices.com/understanding-what-your-trustee-can-and-cannot-do/

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