| What does a Trustee do? |
Following is a list of Trustee duties:
- Organize trust assets. If the trust assets are not organized, the Trustee may have to get assets titled into the name of the trust. This often occurs after a death, when assets are directed into the trust by a Will or a beneficiary designation.
- Manage/Invest Trust Assets. A Trustee has assets assigned to the trust.
The assets are assigned by the “grantor” or “grantors,” and can include the following:
- Real property in any jurisdiction (in state, in other states, or in other countries)
- Personal property (brokerage accounts, CDs, bank accounts)
- Personal effects (furniture, cars, jewelry)
- Business assets (interests in LLCs or S-corporations, etc.)
The Trustee must manage these assets. The Trustee does not need to be a professional asset manager, but if the assets call for professional management, the Trustee should hire a professional manager. The Trust assets must be kept separate from the Trustee’s assets.
- Pay Expenses of Trust. The Trustee must pay trust expenses, such as advisor fees, taxes, management expenses, insurance premiums, etc.
- File income tax returns. The Trust may have a tax return that must be prepared. The Trustee is responsible for having this return prepared.
- Keep Records. The Trustee must keep records about assets, expenses and distributions.
- Accounting. The Trustee has a duty to account to beneficiaries.
- Distribute Property. The Trustee will have a duty to distribute property from time to time. The distributions may be to a beneficiary while the trust is active (such as distributions for a beneficiary’s health or education), or the distributions may be upon trust termination. Trust distributions must be made pursuant to the trust instrument.
- Protect Trust Property. The Trustee’s main function is to protect trust assets. The Trustee must use the Trustee’s best efforts to select appropriate assets and maintain those assets. The Trustee may have to litigate to protect assets, and may have to sell assets that become poor investments. The Trustee should make “prudent” investment decisions, and not purchase extremely risky investments.
- Be Loyal. The Trustee cannot use trust assets for the Trustee’s benefit. Thus, purchases, sales and loans involving the Trustee are severely restricted and often require court and beneficiary approval.
- Use Discretion. Trust terms can be construed in different ways. A Trustee may have a duty to distribute property for a beneficiary’s “maintenance,” and the Trustee must determine what that term means with respect to each trust and each beneficiary.
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