There’s an old saying that the two best days in a boat owner’s life are the day they buy their boat…and the day they sell it. A similar notion can also apply to being a trustee – it’s an honor to be named and a huge relief when it’s over. Let’s discuss the responsibilities involved in being a trustee.
What Is a Trust?
A trust is a fiduciary relationship in which one party (the trustor) gives another party (the trustee) the right to hold title to property or assets for the benefit of a third party (the beneficiary). Trusts are created to provide legal protection for the trustor’s assets, to make certain those assets are distributed according to the trustor’s wishes, and to save time, reduce paperwork and, in some cases, avoid or reduce inheritance or estate taxes.
The Responsibilities of a Trustee
Being a trustee requires knowledge about a wide range of topics, including:
- The trustee’s fiduciary duties, which include loyalty, impartiality, duty of care, protection of trust property, enforcement of claims and the duty to inform and account to beneficiaries, among others (violation of these duties exposes the trustee to liability).
- Understanding the trust’s details, like the distribution instructions’ specifics.
- Investments and the ability to engage and monitor investment managers.
- Administrative matters, such as record keeping and principal and income accounting.
- Estate planning, trusts, and the basics of the estate, gift, and generation-skipping taxes.
- Income tax, including how the federal and state governments tax trusts.
A trustee must also be able to productively communicate and work with the beneficiaries on their financial wellness and distribution needs, which can be a conflicting area.
Speak with an Estate Planning Attorney
The responsibilities of a trustee can be a daunting list. Are you a trustee with questions – or trying to decide who you should name? Let’s talk.
Book your complimentary intro call with the Ozarks Legacy Law team today.