This month I am going to talk a little more about the office of trustee. While some people are familiar with the concept of a trust, many do not understand the role of a trustee or the duties that accompany the position.
Becoming a trustee
First, some background about becoming a trustee. Although named as a trustee or co-trustee, a person does not automatically become a trustee by law. A person may either accept or reject the position of trustee. A named trustee or successor trustee accepts the position by either signing the trust document, signing a separate written acceptance, or by knowingly exercising powers or performing duties under the trust instrument. Once a person accepts the position of trustee, they owe certain duties to the current beneficiaries of the trust.
Duties of a Trustee
The trustee of a trust can be analogized to the CEO of a corporation. The trustee is the manager of the trust and is legally bound to carry out the purpose of the trust on behalf of the beneficiaries. This is similar to how a CEO carries out the purpose of a corporation on behalf of the shareholders. Like a CEO, a trustee has certain legal duties that they owe to the trust beneficiaries.
When a revocable trust is created, the creators of the trust are both the trustees and the beneficiaries as long as they are both alive and competent. Upon the death of the original trust creator(s) there are new beneficiaries as well as a successor trustee or co-trustees. It is the successor trustee which owes certain legal duties to the new trust beneficiaries. This list is not comprehensive and some of these duties may be altered by the actual trust instrument.
Duty to administer the Trust
On acceptance of the trust, the trustee has a duty to administer the trust according to the trust instrument. For a revocable trust this generally means the successor trustee must get the assets together, settle any outstanding liabilities and make the listed distributions to the beneficiaries.
Duty of Loyalty to Trust Beneficiaries
The trustee has a duty to administer the trust solely in the interest of the beneficiaries and never for their own personal profit.
Duty to Inform Beneficiaries
The trustee has a duty to keep beneficiaries of the trust reasonably informed of the trust and its administration. This includes a duty to provide the terms of the trust to a beneficiary.
Although acting as a trustee may sound daunting, it is fairly straightforward when approached methodically. If you have any questions about being a trustee or choosing a successor trustee, please do not hesitate to call and I will be happy to talk with you about it.