A trustee is a type of fiduciary who is in charge of the management of the assets and property in a trust; they can be an individual, institution, or combination of both according to an article from The Balance, “Types of Trustees and What They Do”.
If a trustmaker establishes a revocable living trust, then they serve as trustee themselves. Written into this trust should be a successor trustee who will take over management in the event the trustmaker dies or becomes mentally incompetent. On the other side, if an irrevocable trust is established, the grantor cannot name themselves as trustee. Instead, they must name an individual or institution to take control of the trust. Whether a person is a trustee of an irrevocable trust or a successor trustee of a revocable trust, they have the same duties.
Trustees must act in the best interest of the trust’s beneficiaries, this means setting aside personal wants and goals. A trust agreement should give the trustee guidance as to what the priorities should be concerning the trust. This can be things like priority of benefit, if the trust should fit the needs of the children over the spouse or vice versa, or it can outline parameters of how a trust will support a grandchild’s education, like what schools or types of education expenses it will finance. It can even be set up so that trustee will consider the use of other assets outside the trust before making any distributions from it.
Where a revocable trust is concerned, while the grantor serves as their own trustee before a successor trustee (who would stick to the above duties), they can serve their own interests. They can dissolve the trust or change beneficiaries as they see fit. In the case of an irrevocable trust, since the grantor is not in charge of the trust’s management after it has been established, they will want to write in the priorities of the trust and establish a trustee whom they trust. The trustee who, of course, is bound by the duties of acting in the best interest of the beneficiaries.
The responsibility of the trustee is managing the property owned by the trust. The specifics of their duty depends on what assets are owned by the trust. It can range from overseeing property management (interacting with tenants, maintaining insurance and repairs, and following through with any inspections), to managing investments. In certain states, trustees can delegate certain duties to others, for example, they can hire a financial advisor who can oversee the investments or property manager for real estate.
Picking the right trustee is an important decision, one that once decided upon should be followed up with a lot of communication. The best way to be positive your trust will be handled effectively and in accordance with your wishes is to hold, what we at Family Estate Planning Law Group call a Family Meeting. The purpose of this meeting is to bring together your trustee (whom should have already been in conversation with the client about their position), your family/beneficiaries, and your other professional advisors. This will not only put everyone on the same page about how your trust is supposed to function and how the trustee will be managing it, but will also make sure everyone acts in accordance with your wishes for the trust after you pass and everything else dictated in your estate plan.
Establishing a trust and checking that you have covered all the necessary steps to make your trust run smoothly is not the easiest task. Work with an estate planning lawyer to make sure all your bases are covered.
For more information on this or for guidance on establishing your trust and trustee, visit our website today to schedule your consultation! Also, be sure to explore our blog and connect with us on social media!
Reference: The Balance (October 6, 2017) “Types of Trustees and What They Do”