When accepting the request of a loved one or friend to serve as a trustee, keep in mind that the role comes with official, fiduciary obligations. In other words, as a trustee you are legally responsible for the oversight of the trust, which includes the duties of loyalty, prudence, impartiality and protection. Read on for an understanding of trustee responsibilities.
Trustee Obligations
Unless a trust is complex, financial or legal expertise is not a must for trustees, but a willingness to commit time and reliably follow through is essential. Upon being asked to serve as trustee, it’s a good idea to take the time to carefully review the trust agreement and be sure you understand the goals of the trust, including of course the assets placed in it and the intentions for managing and distributing them. State particulars related to the responsibilities of trustees vary somewhat, but generally, once you have accepted the role of trustee, you can expect your duties to include the following, as explained by attorneys Jamie Quick and Cole Schotz:
Duty to Administer the Trust: Upon acceptance of the trusteeship, a trustee shall administer the trust in good faith.
Duty to Inform and Provide Trust Accountings: A trustee must keep qualified beneficiaries reasonably informed of the trust and its administration. A trustee must provide each qualified beneficiary with a copy of the trust document and upon reasonable request shall provide the beneficiary with relevant information regarding the trust’s assets and liabilities. Once the trust becomes irrevocable, the trustee has a duty to provide a trust accounting to each qualified beneficiary at least annually and on termination of the trust or change of a trustee.
Duty of Impartiality: If a trust has two or more beneficiaries, then the trustee must act impartially and give due regard to each beneficiaries’ interests. In other words, a trustee cannot favor one beneficiary over another or favor a certain class of beneficiaries over another class.
Essentially, a trustee has a fiduciary obligation to the beneficiaries—and must always exercise reasonable care and skill in managing the assets of the trust. Accordingly, the trust agreement may require a trustee bond, which is a specific type of fiduciary bond that protects the interests of the trust and its beneficiaries in accordance with applicable state law. As a leading national provider of many types of fiduciary bonds, Colonial Surety makes it easy and efficient to obtain a trustee bond. Just get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere.
Loyalty, Protection and Prudence
As a fiduciary, a trustee is legally bound to be loyal to the interests of the beneficiaries, as well as to protect trust property, which includes being prudent in managing the assets of the trust. Depending on the nature of the trust, securing professional guidance from accounts, financial advisors and attorneys is wise, and reasonable related expenses can be covered by the trust. Estate planning experts provide this additional detail about the duties expected of trustees:
Duty of Loyalty: A trustee has a duty to administer the trust solely in the interests of the beneficiaries. A trustee is prohibited from self-dealing and must place the beneficiaries’ interests above their own. A trustee must keep all trust property separate from the trustee’s own property.
Protection of Trust Property: A trustee has a duty to take reasonable steps necessary to protect the assets of the trust for the benefit of the beneficiaries. This includes a duty to use best efforts to make trust property productive of income.
Duty to Prudently Manage Trust Property: A trustee has a duty to take all reasonable steps to control and protect trust property. A trustee has a duty to invest and manage the investments of trust property as a prudent investor would do. With an individual trustee this usually means hiring an investment advisor to assist you with making prudent investment decisions regarding the trust property.
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