What Does a Trustee Actually Do?

You might be asked by a parent, sibling, other relative, or friend to be a trustee of a trust that they have established. Typically, they want to name you to be the trustee in the future, over a trust that will be created at their death. Sometimes, they want you to serve as trustee of their own living trust if they can no longer be the trustee. You are fortunate if they ask you first. You may find yourself being named without being asked, only to find out when your loved one’s attorney or other trusted advisor contacts you. Whatever the case, you will want to know what it is you must do as a trustee and what responsibilities you have.

So, what is a trustee? A trustee can be a person or an entity, such as a bank or trust company, that acts as a custodian for trust assets. Trusts can hold anything that an individual can own: including but not limited to bank and investment accounts, real estate, and operating businesses. A trustee is usually responsible for managing and distributing trust assets to the beneficiary or beneficiaries of the trust.

A trustee is a fiduciary, which means a trustee must operate in the best interests of the beneficiaries, not in their own interests. Being appointed as a trustee should signify that the person who named you has a high degree of trust in you. A trustee has several duties that are governed by trust law and by the terms of the trust. The trust instrument itself should outline several terms that comprise both the trustee’s powers and the rules the trustee must follow.

A trustee has certain fundamental duties that are part of managing any trust. If a trustee does not adhere to these duties, they can be sued for breach of fiduciary duty.

A trustee owes a duty of care to the beneficiaries, which means exercising skill and caution over trust property. For example, a trustee must prudently manage investments, maintain good records of all transactions involving trust property, keep an accounting of receipts and distributions, comply with legal requirements, and file tax returns, among others.

A trustee owes a duty of good faith and fair dealing to the beneficiaries. They must adhere to the terms of the trust and to any duties that are not specifically stated in the trust document but are required under Texas law. For example, a trustee must provide full disclosure of certain information to the beneficiaries.

They must exercise great caution to avoid conflicts of interest, including between themselves and the beneficiaries – never putting their interests over the beneficiaries’ interests, even if the trust document allows the trustee to enter into transactions with the trust (buying trust property, for example). When there are two or more beneficiaries, the trustee also has a duty of impartiality toward them, taking into account any differing interests of the beneficiaries.

Serving as the sole trustee or co-trustee of a trust is a major responsibility and should not be taken lightly. Communicating with your attorney is very important, as is hiring an accountant and potentially other professionals to help you undertake your obligation.

Finally, if you are the one naming a trustee or any fiduciary appointment in your estate planning documents, be sure to ask the person(s) you intend to appoint for their permission to do so. You don’t want the person to refuse to serve after your death.

You may visit our website at www.wrightabshire.com. Nothing contained in this publication should be considered as the rendering of legal advice to any person’s specific case but should be considered general information.