What Does a Trustee Actually Do?

A trust is one of the most common tools estate planners use to efficiently distribute property and assets to heirs and beneficiaries. Most people are familiar with a last will and testament, but the function of a trust and its key parties (grantor, trustee, and beneficiaries) are not always understood. This blog post will focus on the obligations and responsibilities of a trustee.

How a Trust Works

Again, there are typically three main parties to a trust:

  • Grantor — This person creates a trust for the benefit of family, friends, or other loved ones. 
  • Trustee — A trustee manages the assets that have been placed (funded) in the trust and disburses the assets to beneficiaries according to the trust’s instructions. 
  • Beneficiary — This person (or persons) receive assets from the trust upon a certain triggering event or circumstance. 

A trust, in its broadest sense, is a contract. The trustee named in a trust agrees to abide by the contract’s terms and carry out his or her duties, which are laid out in the trust. Grantors may use trusts — of which there are many types — for countless purposes. For instance, a grantor might wish for his or her beneficiary to use a trust’s contents solely for educational purposes while the beneficiary is in college. In this case, the trustee would be required to only disburse the trust’s assets to the beneficiary for tuition, textbooks, and other common expenses associated with higher education.

Fiduciary Duties of a Trustee

Regardless of the reason a grantor created a trust, trustees are responsible for putting the interests of the beneficiaries above their own. If, for some reason, assets should not be disbursed to a beneficiary after the grantor passes away, trustees must also maintain the assets in a responsible manner. These obligations, along with some others, make up the trustee’s fiduciary duty. Essentially, someone with a fiduciary duty must act in the best interest of some other person or entity.

Trustees must also provide beneficiaries with financial records detailing the assets and liabilities of the trust’s contents. At certain points — including at termination of the trust — trustees are obligated to provide accounting to beneficiaries. Annually, trustees must file relevant state and federal tax forms related to the trust.

Picking Your Trustee

As the name suggests, the trustee for your trust should be responsible, truthful, and reliable. One route many grantors take is choosing close family members to serve as trustees. These individuals are often intimately familiar with the assets and property that are typically funded in these documents. Licensed professionals like accountants and attorneys who commonly handle trust-related matters are also popular choices for trustees. 

The Anderson Firm can help you or a loved one from start to finish when it comes to trusts. Our team can help you determine whether a trust achieves your goals and, if so, craft one that works for you. Many trusts are living documents, which means we will always be there to answer any questions or make adjustments. Book a consultation with us here.

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