A trust is an essential component of estate planning designed to protect assets for the benefit of the beneficiaries. The trustee performs an indispensable role to every trust. The trustee is an individual or entity responsible for the management and distribution of the trust’s assets in accordance with the wishes of the grantor. The trustee is bound by strict fiduciary duties, which means that the trustee is required to act solely in the best interest of the trust and its beneficiaries, and to avoid any conflict of interest. The trustee’s specific responsibilities vary based on the family situation and the terms of the trust, but there are some fundamental duties that all trustees must fulfil.
One of the most fundamental tasks of every trustee is the prudent management of the trust’s assets. This entails various financial decisions such as investing, budgeting, record-keeping, risk management, and protecting the assets for the beneficiaries. For example, the investing decisions must be made prudently, considering the long-term interests of the trust and the needs of the beneficiaries.
It is the trustee’s responsibility to ensure that the trust complies with all applicable laws and regulations. This responsibility includes filing tax returns and paying taxes, as well as ensuring compliance with any applicable legal requirements related to the trust.
Correct and comprehensive record keeping is vital to proving the trustee’s compliance with the legal and financial obligations. The trustee must keep complete records of all financial dealings related to the trust, including income, expenses, and distributions. Such records show transparency and accountability and protect against potential disputes.
Communication with the beneficiaries is an important, although often neglected, duty of the trustee. The trustee should keep the beneficiaries informed about the trustee’s actions, the financial status of the trust, and any pertinent changes. Maintaining transparent communication with the beneficiaries builds trust among the trustee and beneficiaries and makes the trustee’s duties easier to perform. The trustee should remain impartial and may even assist the beneficiaries in conflict resolution to ensure that the trust’s objectives are met.
The trustee is also responsible for the partial and final distributions of the trust income and principal to the beneficiaries in accordance with the trust’s provisions. The distributions can be as simple as a one-time payment or periodic payments, or more complicated like covering medical, educational, or maintenance expenses.
Sometimes, the trustee may be responsible for modifying the terms of the trust or even terminating the trust based on the specific conditions or requirements stated in the trust document.
Being the trustee carries with it an important responsibility and therefore it is crucial to recognize and acknowledge the potential challenges and risks involved in performing this role. The trustee should become familiar with the legal and financial complexities of the trust administration and should avoid any financial mismanagement as well as even an appearance of conflict of interest. When in doubt, the trustee should seek professional advice and guidance. In short, the trustee should be committed to acting in the best interest of the trust and its beneficiaries.
Natalia Vander Laan is a Minden attorney