What is the Role of the Trustee?
Trustee’s Role
Many people agree to administer a trust without having the slightest idea of what it entails. Most believe it to be a simple matter of distributing the trust assets, but it involves much more. A trustee assumes a fiduciary relationship with the beneficiaries of a trust and, as discussed belowe “A Trustee’s Fiduciary Responsibility,” there is an extensive array of legal duties and obligations imposed on a trustee. As a general rule, administering a trust is a fairly formal process in which the trustee must undertake the distribution the trust assets without the benefit of court guidance. If the trustee does not follow the rules of fiduciary responsibility, the trustee may subject the trust to loss and damage, and may incur personal liability in some instances. The trustee must always put the interests of the beneficiaries ahead of the those of the Trustee. If the Trustee is also a beneficiary, those rights cannot come first, but must be at most strictly equal.
In administration, the trustee must take control of the trust assets including real and personal property as well as various financial and investment accounts. Properties must be managed. Management may be directed by the terms of the trust, but if the trust is silent, there are laws in California that govern the management of a trust. There are notices that should be given including a notice to beneficiaries and heirs and a separate notice to creditors.
The trustee has a duty to keep the beneficiaries informed about the administration of the trust. The trustee should keep detailed records of all assets that are in the trust, all income received, and all expenses of the trust. A trustee has an obligation to see that all tax returns required are filed and all taxes are paid. A trustee should consult appropriate professionals such as an accountant and an attorney during the administration of the trust.
Many people feel honored to be asked to serve as a trustee of a trust without realizing the responsibility it entails. A trustee has a legal relationship with the beneficiaries of a trust. This legal relationship imposes many duties and obligations on the trustee.
Among these duties are the duty:
* to act with a high standard of care,
* to gather, manage and control the trust assets,
* of loyalty to all parties,
* to avoid a conflict of interest,
* to treat all beneficiaries equally,
* to carry out the terms of the trust, and
* to invest and manage assets in accordance with the terms of the trust and the law.
A trustee must take care to avoid co-mingling the assets of the trust with the trustee’s own assets, or with those of other trusts. A trustee must be prepared to report to the beneficiaries to keep them informed of the trust’s activities and a trustee generally will have a duty to account to the beneficiaries for the assets, the income, and the expenses of the trust, including any fees he charges..
These are just a few of the many legal duties and obligations imposed on a trustee.