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:
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.
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.
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.