It may sound awkward, but many people find themselves being named as a trustee for the estate of a family member, loved one, or business partner and find themselves asking, “What is a trustee, what do they do, and how did I become one?”
If you have found yourself in this unenviable situation, not to worry ‒ we are here to help.
What Is a Trustee?
Investopedia defines a trustee as: “A trustee is a person or firm that holds and administers property or assets for the benefit of a third party. A trustee may be appointed for a wide variety of purposes, such as in the case of a bankruptcy, for a charity, for a trust fund or certain types of retirement plans or pensions. Trustees are trusted to make decisions in the beneficiary’s best interests and often have a fiduciary responsibility to the trust beneficiaries.”
The Job of a Trustee
The responsibilities of a trustee include management of the assets that are identified within a trust. A lot of estate holders elect to act as their own trustee. This is a perfectly valid option. However, if the estate holder should become infirm or die unexpectedly, it is essential to have an estate plan set up in advance. And this is likely what occurred to have you end up becoming a trustee.
Married couples often act as co-trustees, creating an automatic back-up policy in case one or the other becomes unable to manage a trust.
The Responsibilities of a Trustee
The most important thing for a trustee to keep in mind is that the items included in the trust are not their own. As the trustee, you are entrusted to the items in the trust and do not gain ownership of those items. A trustee’s job is to manage the assets within the trust in a manner that is in accordance with the best interests and wishes of the proper owner of those assets.
If this is at all confusing, you might think of a trustee as a guardian of the contents of a trust, but not the owner. It is similar to a security guard who protects a given property but does not own it.
The Do’s and Don’ts for a Trustee
There are five main do’s and don’ts for a trustee. These are just very basic things but will give you an idea of what your responsibilities as a trustee will be.
- The Trustee must not mix trust assets with their assets. The trustee must always keep their checking accounts and investments separate from the assets of the trust.
- The Trustee must not use assets contained in the trust for his or her benefit unless the owner authorizes the trustee to do so.
- The Trustee must treat all trust beneficiaries equally; they may not favor any one beneficiary one over another (unless the owner of the trust allows it).
- The trustee must ensure that trust assets are invested in a way that is both prudent and conservative, in such a way that will result in reasonable growth while exposing the assets to the minimum amount of risk.
- The trustee is responsible for keeping full and accurate records, filing all necessary tax forms and making reports to beneficiaries as the trust requires.
Get Help As a Trustee
This may sound like a legal minefield to navigate. But do not worry; you do not have to manage the trust all by yourself. You can access the expertise of consultants, lawyers, and other professionals who will help you manage trust assets in a way that is both responsible and effective.
To learn more about the duties of a trustee, and get help managing your responsibilities, get in touch with the estate planning legal experts at Indigo Family Law today.