I Am A New Trustee – What Do I Need To Know?

What do I need to know as a new Trustee?

As is obvious by the name, the position of TRUSTEE is one of trust. The property you are being asked to manage belongs to someone else who has asked you to manage it for the benefit of the owners and/or the beneficiaries of the TRUST. By being nominated for this position, you have received a strong vote of confidence in your judgment and integrity. By accepting this position, you agree to exercise your best decision-making in managing the TRUST assets for those who are named as beneficiaries of the TRUST. This means that you must take as much or even greater care with TRUST assets than you might take with your own personal finances.

The duty of care required of TRUSTEE is often referred to as a fiduciary responsibility. This responsibility is owed both to the creators of the TRUST (i.e. the TRUSTORS or GRANTORS) and the beneficiaries of the TRUST (the people who receive distributions of trust assets), and encompasses many things including a duty of loyalty, a duty of fairness, a duty to act prudently (i.e. reasonably, conservatively), a duty to keep accurate and detailed records, a duty to act in complete good faith, a duty to keep beneficiaries reasonably informed, and a duty to act impartially, among others. In addition to these general duties, the TRUST may spell out other specific duties. State law may impose even more duties.

A TRUSTEE operates under a TRUST AGREEMENT of one kind or another. This TRUST AGREEMENT is usually very detailed and serves as a roadmap for what the TRUSTEE can do, cannot do, and may do under certain circumstances. As a result, the TRUSTEE has to be well acquainted with the TRUST AGREEMENT and should refer back to it often when making decisions. The TRUSTEE is obligated to seek professional assistance to help him/her understand the TRUST. Additionally, there may be some tasks the TRUSTEE is called to do which may require the assistance of professionals, like filing taxes. Use of various professionals to understand or administer the TRUST is quite common and usually necessary. So long as these services are necessary and reasonable, the TRUST assets may be utilized in paying for this assistance.

The TRUSTEE should understand that property held in a TRUST is owned by the TRUST. A TRUST, similar to a corporation, acts through certain specified individuals. In the case of a corporation, it will be officers and employees. In the case of a TRUST, it will be through the TRUSTEE. Unless the TRUST says otherwise, usually the TRUSTEE has power over the TRUST assets that permits him/her broad discretion in how to manage and invest those assets, but always keeping in mind the fiduciary nature of the relationship so that the TRUSTEE always remembers the duties he/she has managing assets for the benefit of the beneficiaries.

The TRUSTEE will have numerous other functions and obligations which will vary depending on the terms of the TRUST AGREMENT, the nature of the assets held in the TRUST, family dynamics, and more.

As is probably evident from the above article, serving as a TRUSTEE can be very complex legal.  While this article discusses some basic issues regarding TRUST ADMINISTRATION, it is not intended to be exhaustive.  Because these issues can be complex, subtle and often times difficult to spot, it is best to speak with a knowledgeable attorney who can assist you with TRUST ADMINISTRATION.  Platt & Westby is an AV rated Firm that has served the community for over forty years and has offices in Phoenix, Arrowhead/Sun City, Litchfield Park, Scottsdale and Gilbert Arizona.  If you are interested in discussing administration of a TRUST, contact our office by calling 602-277-4441 or visit www.plattwestby.com to schedule a consultation with one of our experienced attorneys.