What is a trustee and what are their responsibilities in estate planning? Estate Planning is something everyone, not just the very wealthy, should do. Without a legal, defined plan in place, you’re leaving your entire legacy in the hands of the courts. In this beginner’s guide, we will cover everything you need to know about what a Trustee is, what their duties are, and how to choose the right one for you.
What is a Trustee?
A Trustee is a person who acts as a custodian for the assets held within a Trust. He or she is responsible for managing and administering the finances of a Trust per the instructions given. The simplest Trustee definition is the named person who manages a Trust’s assets.
How to Choose the Right Trustee
Choosing the right Trustee can be a daunting experience. But there are a few things you can assess to feel more confident in your decision. Almost anyone you trust, who is over the age of 18, can be your Trustee.
Here are some common options for trustees:
Friends/Family
This is a common route, but also comes with the potential for family drama and even resentment. However, if you have a friend or family member whom you trust, the peace of mind this option offers can be worth it. Someone close to you will have the obvious benefit of knowing and understanding your family dynamics. Be sure they are willing to take on the task.
Lawyer/Attorney
A good option if you don’t have a close family member or friend to assume the role. Or, if you simply can’t decide and are worried about hurt feelings or disagreements amongst your loved ones, appointing a non-partial third party like a lawyer can be a good solution. If you have a long-standing relationship with your attorney, another benefit is that they will have insight into your family. Keep in mind, this may cost more, which could ultimately reduce the amount your beneficiaries will receive.
Trust Company
Hiring a Trust company can be a great solution for many reasons. Though you’ll pay a fee for the service, it can be well worth it if you anticipate any contention amongst beneficiaries. A Trust company will be able to take a stern, matter-of-fact approach to your estate, saying no when necessary, and safeguarding your legacy as they see fit per the discretion and guidance of the Trust. It’s important to note, however, if you choose this option, removing a Trust company can potentially be difficult.
Trustee Duties & Responsibilities
A Trustee has many roles, but the main purpose is to carry out the Trust’s directions. The ultimate goal of any Trust is to protect your legacy. So when thinking about “what does a Trustee do” or “what is the role of a Trustee,” it’s easiest to remember that there are many aspects to the role.
Trustees will be required to do some or all of the following:
Act as a fiduciary
Being a fiduciary means that a trustee is held to a very high standard when it comes to protecting the Trust’s investments and making sure that the assets are distributed correctly to the beneficiaries.
Understand Trust terms and ensure asset safety
Review records and know beneficiaries.
Invest Trust assets
Preserve assets as directed by the Trust.
Administer the Trust
Follow the Trust direction for asset distribution.
Make ongoing decisions
Decide when and how beneficiaries receive payments, with respect to discretionary powers.
Do I Need a Trustee in My Will?
You do not necessarily require a Trustee unless you create a Trust as a part of your e. If your Estate Plan solely outlines the inheritance of your assets, then you don’t need a Trustee. However, in case your Estate Plan is more intricate, which includes a Trust, you will have to appoint a Trustee to manage the Trust’s assets.
When you create your Estate Plan, it’s crucial to consider your unique situation and goals. If you have minor children or beneficiaries with special needs, a Trust can provide additional protection and control over the assets that you leave behind. Furthermore, if you have concerns regarding the management or distribution of your assets after your death, a Trust can offer more specific instructions and oversight.
Can a Trustee Be Held Personally Liable?
Yes, a Trustee can be held personally liable if they fail to act in the best interest of the beneficiaries and the Trust. Keeping accurate records and following the Trust’s instructions can protect a Trustee from personal liability.
Beneficiary vs Trustee: What’s the Difference?
The beneficiary benefits from the Trust, while the Trustee is in charge of managing it. Trustees hold and manage all assets and property inside the Trust and distribute them to beneficiaries as needed.
Trustee vs Executor: What’s the Difference?
Trustees manage and distribute assets inside a Trust, while Executors distribute a deceased person’s assets as directed by their Will.
What is a Successor Trustee?
A Successor Trustee is the person named to take over the Trustee’s role if they become incapacitated or pass away. It’s a good idea to name an alternate in case the initially-named person is unable or unwilling to serve.
How Long Does a Trustee Have to Settle a Trust?
Trustees can take as long as needed to settle a Trust as long as they act in a timely manner and follow the Trust’s instructions. Most Trusts take 12-18 months to fully settle, but it can take longer for complicated Trusts or those with minor beneficiaries.
How Does a Trustee Get Paid?
Trustees are paid reasonable compensation for their duties, which is typically defined in the Trust. They are paid from the Trust’s assets.
In Summary
A Trustee is a person who manages and administers the assets held within a Trust. They are responsible for carrying out the instructions of the Trust and ensuring that the assets are managed in the best interest of the Trust. When choosing a Trustee, it’s important to find someone who is trustworthy, responsible, and has the necessary skills and knowledge to carry out the duties of the role.
While a Trustee is not necessary for every Estate Plan, they are an important part of a Trust. If you have questions about whether or not you need a Trustee in your Estate Plan, it’s always best to consult with an Estate Planning attorney who can provide guidance and advice based on your unique situation and goals.
