Duties of a Trustee

You have completed your estate planning and have created a trust.  Do you know what the duties of your named trustee are?

You are probably thinking – the trustee has to take care of the assets, pay any related bills, file any required income tax returns and make distributions.  Am I on the right track to your thinking?  Well, you are not wrong, but you are not entirely right.  Here are duties which are usually silent when thinking of what the trustee should be doing:

  • Duty of Good Faith.  The trustee has a duty to administer the trust “in good faith”. This includes protecting the trust property. 
  • Duty of Loyalty.  This is defined as loyalty to administer the trust solely in the interest of the beneficiaries.  It prohibits the trustee from engaging in self-dealing transactions or activity that involves or creates a conflict between the trustee’s fiduciary duties and their personal interests. 
  • Duty of Impartiality.  When there are multiple beneficiaries, the trustee must act impartially with investing, managing and distributing trust assets. 
  • Duty of Prudence.  Administering the trust prudently includes the exercise of reasonable care, skill and caution.  The test of prudence is one of conduct not of performance.  The trustee is to be judged on their action or decision and not on the outcome.  This would also include prudent investing. 
  • Duty to Make Trust Property Productive.  The use of reasonable care and skill to make the trust property productive includes the duty to obtain suitable investment returns and other benefits consistent with the purpose and intent of the trust. 
  • Duty to Inform and Report.  Beneficiaries are to be kept reasonably informed about the trust and its activities to allow them to protect their interests. 
  • Duty to Control and Protect Trust Property.  The trustee shall take reasonable steps to take control of and protect the trust property. 
  • Duty to Enforce and Defend Claims.  Reasonable steps to enforce claims of the trust and to defend claims against the trust are one of the duties of a trustee.  If attorney fees and costs are incurred by the trustee in doing so, the trustee is entitled to reimbursement as long as it is determined that the trustee did not breach the trust. 

So, as you can see, there is more to being a trustee than may be thought.  It is important to ensure that the party you are selecting as trustee will be able to “perform” these duties.  Otherwise, there could be claims against the trust and/or trustee for mismanagement of the trust. 

While these “duties” are addressing the duties of a trustee, they also pertain to executors of an estate.  Does your trustee and/or executor measure up to carrying out these duties?

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About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Fiduciary Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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