What is a Trustee - Trustee Duties and Responsibilities | Trust & Will (2023)

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. Estate Plans come in many shapes and sizes, but if there’s one thing we know, it’s that the process is definitely not one-size-fits-all.

That’s why Trust & Will is dedicated to taking the confusion out of Estate Planning, with customized plans made to fit your needs. Whether you need a basic Will or a full-blown Trust with an appointed Trustee (or, both!), we’ve got you covered.

It’s easy to confuse the two concepts of Wills and Trusts, but they’re actually very different in intent. If you’re not sure what a Trust or a Trustee is, you’re in the right place. Keep reading to learn:

  • What a trustee is

  • What a trustee does

  • Other common questions about the role of a trustee

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. Often, the person who creates the Trust is the Trustee until they can no longer fill the role due to incapacitation or death. At that point, a Successor Trustee takes over. The responsibilities can include recording expenses and income, distributing funds to beneficiaries, filing taxes on any income the Trust makes and keeping record of other transactions that occur.

(Video) Five Duties Of A Trust’s Trustee

The simplest Trustee definition is: the named person who manages a Trust’s assets.

The most important aspect of the role of Trustee is ensuring one acts in the best interest of the Trust. When thinking about whom to appoint as Trustee, it’s important to find someone who will be able to put all personal goals aside and follow the instructions as the Trust dictates.

How to Choose the Right Trustee

Choosing the right Trustee can be a daunting experience. Particularly if you have children who your Trust will provide for, you definitely might feel the weight and pressure of “getting it right.”

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.

  • 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 he or she is 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 he or she will have insight to your family. Keep in mind, this may cost more, which could ultimately reduce the amount your beneficiaries will receive.

    (Video) Trustee Responsibilities.

  • 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.

What Powers Does a Trustee Have - Trustee Duties & Responsibilities

A Trustee has many roles, but the main purpose is to carry out 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 there are many aspects to the role. Trustees will be required to do some or all of the following:

  • Act as a fiduciary: The role of fiduciary means one is held to a high standard in terms of protecting the investments and distribution of the Trust. Some even feel that a Trustee must pay more attention to the Trust than they do his or her own personal accounts.

  • Understand the terms of the Trust and ensure safety of assets: Assets within a Trust must remain safe, so a Trustee should understand the basic terms outlined in the Trust. He or she should know who all the beneficiaries are and have access to and review all the records to ensure they’re in order and accurate.

  • Invest assets when necessary: If the Trust dictates, a Trustee should invest assets with the intention of preserving them now and in the future.

  • Administer the Trust: Per the Trust direction, a Trustee would need to distribute and/or administer assets to any beneficiaries.

    (Video) Six Powers Of A Trustee

  • Make ongoing decisions: As needed, Trustees should be willing and able to make decisions about how and when beneficiaries receive payment, as well as decide on other provisions of the trust.Keep in mind that these decisions are with respect to discretionary powers given to a trustee. For example, Trust & Will’s Trust-Based Estate Plan requires the trustee to distribute all income earned to the beneficiaries. That's mandatory, so the trustee really doesn't get any say in it (or at least not much). But, our Trust also says the trustee may give additional distributions as needed. That's discretionary and the trustee has to determine if it's a legitimate need and then determine how much to distribute.

  • Keep track of records and prepare tax-related forms/filings: In addition to preparing and filing tax returns, Trustees also need to keep financial records and statements organized and filed.

  • Communicate with and answer beneficiaries' questions as needed: Communication can include things such as providing statements and account information and offering an overview of tax reports.

  • Answer questions: A big part of acting as Trustee entails finding out the answers to beneficiaries’ questions and then ensuring the information is disseminated appropriately and in a timely fashion.

A Trustee’s duties may also change over time. In most cases, when you create a Trust you are both the Trustee and the beneficiary, and you have more flexibility over what you can and cannot do. That makes sense because you’re responsible for your own self. If you are ever to become incapacitated, or upon your death, the person you name Successor Trustee then steps in.

What is the Role of a Trustee: Commonly Asked Questions

Even after the basic responsibilities of a Trustee are known and understood, there are often several questions that tend to come up. Knowing the answers to some of the following questions can help ease any stress and uncertainty a Trustee may feel as they take on their role.

(Video) The Role of a Trustee | Responsibilities of a Trustee

Can a Trustee Be Personally Liable?

In general, yes, a Trustee can be held personally liable. He or she must make all decisions in the best interest of the Trust and on behalf of the beneficiaries’ benefits. Trustees can protect themselves by keeping accurate, detailed records of the financial transactions and distributions. And the single best thing a Trustee can do is really have a solid grasp on and understanding of the Trust’s instructions.

What is the Difference Between Beneficiary and Trustee?

The difference between a beneficiary and a Trustee is simple. A beneficiary benefits from the Trust, and a Trustee is in charge of it. Trusts are created to benefit someone or something else (often a child or other family member). Trustees are responsible for holding and managing all the assets and property inside the Trust as well as distributing assets as needed to the beneficiaries named.

Trustee vs Executor

Trustee vs Executor really just has to do with Trusts vs Wills. A Trustee will administer a Trust, handling the assets inside the Trust and distributing or managing them as the Trust directs. An Executor, on the other hand, oversees and manages an estate by distributing a deceased person’s assets as directed by a Will.

What is a Successor Trustee?

A Successor Trustee is named second in line to serve as Trustee. Most often, the person who creates the Trust is Trustee until he or she is incapacitated or passes away. At that time, the Successor Trustee steps in. If the Successor Trustee is either unable or unwilling to serve the role required, it can be a good idea to name an alternate just in case anything happens to the originally-named person.

How Long Does a Trustee Have to Settle a Trust?

A Trustee can essentially have as long as needed to settle a Trust, provided they are acting in a timely manner and as directed by the Trust. Most Trusts take between 12 - 18 months to fully settle and distribute all assets. Generally, it takes at least six months (but often longer) to settle a Trust. The time it takes greatly depends on how complicated the Trust is and what provisions are required, as well as how old the beneficiaries are. Trusts created for the benefit of minor children may be active until the child or children are of a certain age.

How Does a Trustee Get Paid?

A Trustee gets paid what would be considered “reasonable compensation” to fully perform the duties necessary. Trustees are paid out of the Trust assets, and occasionally (though not often) the Trust will define what the compensation amount should be.

(Video) Trustee and Executor Dos and Don'ts - Absolute Trust Talk

Understanding the role and responsibilities a Trustee must take on is key in order for the job to be well done. Knowing what’s expected ensures that anyone taking on the task will be able to perform his or her duties to the best of their ability.

If you’ve got an existing Trust that needs to be updated, or if you’re ready to start a Trust for the first time, take a look at what Trust & Will’s Trust-Based Estate Plan has to offer! Learn all about our comprehensive Estate Planning services that thousands of people just like you have used. We make the process simple, effective and affordable, because we believe everyone should have access to Estate Planning that protects their family and their legacy.

FAQs

What is the difference between will and trustee? ›

Will: a legal document that directs who will receive your assets and property at the time of your death. Trust: a legal arrangement where a “trustee” (someone you select) manages and holds title to your assets and property and distributes income to the beneficiaries that you select.

What is a trustee everything you need to know? ›

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. Often, the person who creates the Trust is the Trustee until they can no longer fill the role due to incapacitation or death.

Who has more power a trustee or beneficiary? ›

And although a beneficiary generally has very little control over the trust's management, they are entitled to receive what the trust allocates to them. In general, a trustee has extensive powers when it comes to overseeing the trust.

What can trustees not do? ›

A trustee must not place himself or herself in a position in which his or her duties as a trustee conflicts with his or her private interests. The trustees can only act within the terms of the trust deed. If they act outside those powers they are said to be in breach of trust.

What powers do trustees of a will have? ›

Normally, a Trustee will have the following powers: to invest the Trust assets; to deal with land; to delegate certain matters to an agent or nominee; to insure the Trust's property; to make advances of capital to beneficiaries; to provide for beneficiaries who are under age; and to lend funds to beneficiaries.

Who has more power executor or trustee? ›

If you have a trust and funded it with most of your assets during your lifetime, your successor Trustee will have comparatively more power than your Executor. “Attorney-in-Fact,” “Executor” and “Trustee” are designations for distinct roles in the estate planning process, each with specific powers and limitations.

Can a trustee be a beneficiary of a will? ›

Can a trustee also be a beneficiary? In principle, there is nothing that prevents a beneficiary from being a trustee. However, certain factors may limit this from occurring. For example, the trust deed may state that neither the settlor nor a beneficiary can become a trustee.

Why does a will need a trustee? ›

The Trustees become responsible for receiving the inheritance from the estate on behalf of the Trust. Cash or assets are held by the Trustee in accordance with the terms of the Will, until the Trust is brought to an end by the delivery of the cash or assets to the ultimate intended beneficiaries.

What are two mandatory duties of a trustee? ›

The Act now sets out mandatory and default Trustee duties. To act in accordance with the terms of the Trust To act honestly and in good faith. To hold or deal with Trust property, and otherwise act, for the benefit of the beneficiaries or for the permitted purpose.

Can a trustee change a will? ›

No. The executors of a will have a duty to act in the best interests of the estate and the people named in it. So, an executor can't change the will without the permission of the beneficiaries.

Who is a trustee accountable to? ›

Trustees must follow the terms of the trust and are accountable to the beneficiaries for their actions. They may be held personally liable if they: Are found to be self-dealing, or using trust assets for their own benefit. Cause damage to a third party to the same extent as if the property was their own.

What is a trustee in a will? ›

An estate trustee is the person or one of the people that you name in your Will to take care of all of your personal belongings or your financial assets after you have died. The options of who you could name as your estate trustee are endless. For example, your estate trustee could be: your spouse. your adult child.

Do trustees have access to bank accounts? ›

As your trustee will have the authority to make your mandated secured loan payments throughout the duration of your bankruptcy and will have access to all of your financial information and bank accounts.

Can a trustee withdraw money? ›

The trustee will generally be permitted to withdraw money from a trust to cover the cost of third-party professionals, as well as any other expenses arising as a result of administration.

What are the three roles of a trustee? ›

The trustee must distribute the property in accordance with the settlor's instructions and desires. His or her three primary jobs include investment, administration, and distribution. A trustee is personally liable for a breach of his or her fiduciary duties.

Do you get paid to be a trustee? ›

Some trusts can take a lot of your time to manage properly. As a trustee, you usually won't be paid or get any benefit yourself. You'll be carrying out your duties as a trustee for the benefit of others. Being a trustee is a long-term commitment.

What are the liabilities of a trustee? ›

Trustee liability

This means a trustee's obligation is to restore the trust fund to the position it would have been in had the breach not occurred. The trustee will be personally liable to account to the trust for loss that occurs as a result of their breach of trust.

What authority do trustees have? ›

In modern trusts, trustees have the power to make any kind of investment, but in exercising this power they must: exercise a standard of care as is reasonable in the circumstances; look at both the kind of investment (e.g. shares) and the particular investment of that kind (e.g.

Who is the best person to manage a trust? ›

A corporate trustee such as a bank trust department, a lawyer, or a financial adviser will typically know more about trust management, investments, and taxes than a family member, so a pro can be a good choice if you have a large trust or complex assets in it.

How many trustees can a will have? ›

Ordinarily, a maximum of four Trustees can be appointed. A single Trustee can be appointed but it is usually recommended that you appoint at least two.

Can an executor and trustee be a beneficiary? ›

We can say that the trustee is “less powerful” than the executor mainly because they cannot execute and pay off any debts for the deceased using the deceased's money. However, there is half a chance that the trustee can be listed as a beneficiary too in the deceased's will (contestable).

Who owns the property in a trust? ›

Once a trust is formed and the assets transferred out of the founder's name, the trust owns the assets. Practically, this means that once the founder passes away, the assets in the trust will not form part of the deceased's estate and will not be liable for estate duty.

Is it better to be a trustee or beneficiary? ›

The trustee has the power to make management decisions regarding the trust, but the beneficiaries do not wield such power. However, the law gives beneficiaries certain rights, like requesting a trust accounting and receiving assets from the trustee in a timely manner.

How many trustees should a will have? ›

Choose people you can rely on to be your trustees and make sure they're happy to take on this responsibility. You should have at least two trustees but can choose up to four.

What is the difference between a trustee and an executor of a trust? ›

An executor is the person who will help execute the plan you laid out in your last will and testament. A trustee is responsible for managing a trust on behalf of its beneficiaries.

Do trustees need probate? ›

The trust property belongs absolutely to the beneficiary(ies), not the trustees. As a consequence, on the death of the settlor/beneficiary, the bare trust's assets form part of the deceased's estate, and hence probate needs to be obtained before the executors can make distributions to those inheriting.

Do you need qualifications to be a trustee? ›

Most people over the age of 18 can become trustees, but a few will not be eligible (for example if you are disqualified as a company director). The Charity Commission provides guidance on who can't be a trustee. What skills and qualities do trustees need? that they have identified on the board.

What duties do trustees have to beneficiaries? ›

A Trustee owes a duty of honesty, integrity, loyalty and good faith to the beneficiaries of the trust. A trustee must at all times act exclusively in the best interests of the trust and be actively involved in any decisions.

What qualities should a trustee have? ›

A good trustee needs to be fully committed to their organisation's purpose and beneficiaries. But not only that, they need to give the time and dedication to the role to ensure they make a positive difference. A good trustee should be willing to have an informed debate at meetings and make well thought out decisions.

What is the standard of care required of a trustee? ›

The general standard is that trustees must carry out all their functions to a certain minimum standard and must “exercise the same care as an ordinary prudent man of business would exercise in the conduct of his own affairs” (Trustee Act 1925).

Who controls the money in a trust? ›

Trust Funds are managed by a Trustee, who is named when the Trust is created. Trust Funds can contain money, bank accounts, property, stocks, businesses, heirlooms, and any other investment types.

Do you own property if you are a trustee? ›

You do not personally own the property transferred to the trust. It belongs to the trust. You control the trust by holding the power to remove and appoint trustees. If property transferred into the trust is Land, the title will be in the name of trustees and not the name of the trust.

Does being a trustee affect taxes? ›

A: A trust computes its income tax liability in much the same way that an individual does and is allowed most of the credits and deductions that an individual is allowed. Similarly, deductions not allowed to individuals are not allowed to trusts.

Can a trustee ignore a beneficiary? ›

Yes, a trustee can refuse to pay a beneficiary if the trust allows them to do so. Whether a trustee can refuse to pay a beneficiary depends on how the trust document is written. Trustees are legally obligated to comply with the terms of the trust when distributing assets.

What happens if a will is not followed? ›

The executor has a duty to carry out this work diligently, acting in the best interests of the estate and the beneficiaries at all times. If an executor breaches this duty, then they can be held personally financially liable for their mistakes, and the financial claim that is made against them can be substantial.

Can a beneficiary withdraw money from a trust? ›

Generally, a trustee is the only person allowed to withdraw money from an irrevocable trust.

What is misconduct of a trustee? ›

• any other legal duty that applies to the charity or its trustees (Trustees' key legal duties are explained in The essential trustee.) Misconduct includes any act (or failure to act) that the person committing it knew (or ought to have known) was criminal, unlawful or improper.

What is mismanagement of a trust? ›

Putting his or her interests before the best interests of beneficiaries. Mixing trust money and assets with his or her personal accounts. Failing to provide proper notification to beneficiaries. Improperly investing assets. Deviating from the instructions of the trustor.

What are the 3 duties of a trustee? ›

The trustee must distribute the property in accordance with the settlor's instructions and desires. His or her three primary jobs include investment, administration, and distribution. A trustee is personally liable for a breach of his or her fiduciary duties.

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