What Are the Duties of a Trustee?

To understand the duties of a Trustee, it is necessary to first understand what a Trust really is and the parts that make up a Trust.

A Trust is like a Will in that it gives instructions about how you want things handled and who you want to benefit from your assets after you die. There are three different kinds of Trust. A Testamentary Trust takes place only after you die. An Irrevocable Trust cannot be changed or cancelled once it is in place, except with the consent of the beneficiary, even by the even by Grantor of the Trust. A Revocable Trust can be changed or cancelled by the Grantor at any time. The Irrevocable Trust has tax benefits because it is considered a gift to the beneficiary, but a Revocable Trust does not enjoy this tax-free status for your beneficiary. Your attorney can help you understand the reasons why you may want to use each of these.

A Trust is made up of the Grantor, the Trustee (sometimes also a Successor Trustee), and the Beneficiary or Beneficiaries.

The Grantor of a Trust is sometimes called a Trustor, Settlor, Creator or Trustmaker and is the one who owns the original assets.

A Trustee manages the assets of the Grantor’s Trust. You may choose to manage your own assets and become your own Trustee, or you may be a Co-Trustee your assets, along with your spouse. In the case of married couples, most usually it is set up that the assets transfer to the surviving spouse in the event one dies before the other. There will be no court intervention and the process should be seamless for the remaining Trustee.

Sometimes a Successor Trustee is also named. This is someone who can intervene in cases where the Trustee can no longer make decisions – usually in the case of incapacitation or death of the original Trustee.

As a Trustee, the Grantor should make you familiar with the Trust and all of the assets that are a part of it. Not only should you know what is included in the Trust, but you should be made aware of the physical whereabouts of these assets. This will include the Trust Document, any Deeds, Insurance policies, etc. and instructions on how to get to these documents in the event you need to take over. It is not always necessary to know the exact value of such assets, since some people are very protective of this information and may not be ready to show you the information. You will need to know if you are the only Trustee or if there are others, also if you are not acting alone, in which order are you expected to act.

There are laws which bind a Trustee and it is important to remember that these assets are not your own. You will be responsible for following the Trust document. You must never mingle your own funds with those of the Grantor’s. At all times separate checking and investment accounts will be maintained and you must never use assets from the account for your own benefit, unless this is granted to you by the Trust. Unless specified within the Trust, you cannot favor a beneficiary over another. Duties will include an accurate accounting, record keeping and prudent investment of the Grantor’s assets, but you can use professionals to help. Just remember that you will be accountable for filing tax returns and accurate reporting to the beneficiaries.

What happens If the Grantor becomes Incapacitated Before Death?
The Trust document may provide instructions regarding the Grantor’s possible incapacity. These provisions must be followed and when you step in as Trustee where all the assets have been transferred to the Trust, the affairs can be managed quickly, easily and apart from the court system.

First attend to the Grantor’s needs, making sure that health care is supportive and of good quality. A medical power of attorney, living will and other health care documents must be made available to the physician. If there is a separate Trustee in charge of health matters, be sure they are informed immediately. Offer to make other notifications, if necessary.

Review the Trust document and notify any co-Trustees as soon as possible. Notify the attorney who prepared the document for any advice or nuances that can be explained.

If the Grantor recovers, they will resume taking care of their own affairs. If the Grantor dies, your duties will be essentially those of an Executor of a Will. All of this takes time and Trustees are entitled to reasonable compensation. This should be outlined within the original Living Trust. Just a reminder: you don’t have to do it all it is too much for you to handle. Professionals can be hired, the next Successor Trustee can be asked to step in, or if no one is available, a Corporate Trustee can be named.