A living trust is a common estate planning tool. When creating your trust, one of the most important choices you’ll make is who will serve as your trustee. In most cases, at the time you create your living trust, you will be your own trustee for as long as you are living and competent. But when you are no longer able to manage your trust, there are many things you should consider when deciding who will serve as your successor trustee. Let’s break down what a trustee does, what they are allowed and not allowed to do, and what you can do if you think a trustee isn’t doing their job properly.

 

The Trustee’s Role and Responsibilities

A trustee has a lot of power, which comes with a lot of responsibility. It is the trustee’s job to manage your trust’s assets and ensure your wishes are carried out for the benefit of your loved ones once you are gone.

 1) Acting in the Best Interests of Beneficiaries of the Living Trust or Estate Plan

A trustee has a “fiduciary duty,” which simply means they must act in the best interests of the trust’s beneficiaries. This includes:

• •   Loyalty: Putting the beneficiaries’ interests above their own.
  • Care: Managing the trust’s assets responsibly and prudently.
  •  Fairness: Treating all beneficiaries impartially.

 2) Managing the Trust Assets

The trustee’s job includes:

• •  Handling Assets: Investing and managing the trust’s assets wisely.
  • Distributing Funds: Making sure the beneficiaries receive their share according to the trust’s terms.
  • Record Keeping: Keeping accurate records of all transactions and providing updates to beneficiaries.

3) Keeping Beneficiaries Informed

Communication is key. The trustee should keep beneficiaries informed about the trust’s status and any significant decisions being made.

 

 

What a Trustee CAN Do

✅ Invest Trust Assets 

Trustees are allowed to invest the trust’s assets, but they must do so carefully, balancing risk and return to protect the beneficiaries’ interests.

✅ Hire Professionals

 Trustees can hire professionals like attorneys, accountants or financial advisors to help manage the trust. However, they must supervise these professionals to ensure everything is done correctly.

✅ Make Distributions

Trustees are responsible for distributing the trust’s assets to the beneficiaries as outlined in the trust document. This might include making discretionary decisions about when and how much to distribute.

✅ Charge Reasonable Fees

 Trustees can be compensated for their work, but the fees must be reasonable and are often specified in the trust document.

 

What a Trustee CANNOT Do

🚫 Self-Dealing

 Trustees cannot use the trust’s assets for personal gain. For example, they can’t buy trust property for themselves at a discount, make loans or gifts to themselves from trust assets, or funnel money from a trust account into a personal account.

🚫 Conflicts of Interest

 Trustees must avoid any situations where their personal interests could conflict with their duties to the beneficiaries. For example, a trustee must not invest trust assets into the trustee’s own business or that of a relative or friend, or sell trust assets to a relative, friend or business associate at a discount.

🚫 Negligence

 Trustees cannot be careless in managing the trust’s assets. They must follow prudent investment strategies and protect the assets and avoid risky investments, such as investing in crypto currencies

🚫 Ignoring the Trust Terms

 Trustees must follow the specific instructions outlined in the trust document. They cannot change these terms unless allowed by the trust or by law.

 

What to Do If You Suspect a Breach of Duty

Recognizing a Problem

 A breach of fiduciary duty happens when a trustee fails to act in the beneficiaries’ best interests or does not follow the trust’s terms. This might include:

• Mismanaging assets
• Failing to provide information
• Treating beneficiaries unfairly

 

Taking Action

 If you believe a trustee is not fulfilling their duties, you have several options:

Request Information: Ask the trustee for detailed reports and records.

Mediation: Try to resolve disputes through mediation before going to court.

Legal Action: If necessary, you can take the trustee to court. Remedies might include removing the trustee, recovering lost assets, or other penalties.

 

Preventing Issues

To avoid problems:

Choose Wisely: Select a trustee who is trustworthy and capable. Consider co-trustees or naming a trust protector who will manage disputes between the trustees and the beneficiaries.

Set Clear Terms: Make sure your trust document is detailed and clear about the trustee’s responsibilities.

Review Regularly: Periodically review the trust’s administration to ensure everything is in order.

 

Still Need Help?  Consult A Professional

Choosing a trustee is a critical decision in your estate planning process. Understanding what a trustee can and cannot do helps ensure your trust is managed properly for your beneficiaries. If you suspect that a trustee is not fulfilling their duties, it’s important to act quickly to protect your interests.

JMS Law is here to help guide you through these complexities and ensure your estate plan is executed as you intended. Contact Attorney Jill Santiago by clicking the link below.