Responsibilities of a Trustee
How To Manage A Trust - The 6 Major Responsibilities of a Trustee
Being named the Trustee in someone else’s Living Trust is a big responsibility. It means they have selected you to manage and distribute their lifetime accumulation of money and assets when they die or if they become incapacitated.
Because the responsibilities of a Trustee include managing someone else’s assets, Trustees have a legal fiduciary obligation to act according to the wishes in the Living Trust document.
If this sounds overwhelming, don’t worry…
We wrote this article help you answer the following questions:
- What is a Living Trust and why is it important to the Trustee?
- Who are all of the parties in a Living Trust the Trustee needs to know about?
- I have been named Trustee – What should I do now?
- Are there other documents I need to know about?
- What are the 6 major responsibilities of a Trustee?
- What should I do if the Grantor becomes incapacitated?
- What should I do if the Grantor passes away?
What Is A Living Trust?
A Living Trust, is one of the best and most commonly used methods people use to pass their assets to their loved ones after they die.
Similar to a Last Will and Testament, A Living Trust explains who should receive that individual’s money and property after the pass.
So, how does a Living Trust work?
When a person creates a Living Trust, they legally transfer their property into the Trust and manage it themselves as the Trustee while they’re still alive.
When the person who created the Trust dies or becomes incapacitated, an individual they’ve selected – their Successor Trustee – takes over managing the Trust and its assets according to the strict directions outlined in the Trust document.
If you have been named Successor Trustee – the Living Trust is the most important document you will need to familiarize yourself with.
More on that in a moment…
Who Are All Of The Parties In A Living Trust?
Grantor
Sometimes referred to as the Settlor, the Grantor is the person who created and funded the Trust. If the Trust was created by a married couple together, they can be Co-Grantors. Only the Grantor has the legal authority to change the Trust.
Trustee
A Living Trust will appoint a Trustee. The Trustee is the individual who is responsible for managing all of the assets in the Trust. Usually while the Grantor is still alive, they act as the Trustee until they’re unable. If the Grantor dies or becomes incapacitated, the Successor Trustee takes over management of the Trust.
Successor Trustee
If you have been named the Trustee in someone else’s Trust – this is you.
A Successor Trustee is named to step in to manage the Trust if the Grantor dies or becomes incapacitated.
Being named the Successor Trustee is a big responsibility that brings along extensive duties. For this reason, Grantors usually name someone they know who can execute the Trust according to their wishes. It could be a close family member, friend, or even a professional like a Trust Administration attorney.
Beneficiaries
Beneficiaries are the individuals or organizations who will receive the assets in the Living Trust if the Grantor dies. One of the responsibilities of a Trustee is to ensure that the beneficiaries receive the assets in the Trust according to the Grantor’s wishes.
I Have Been Named Successor Trustee - What Now?
If a Grantor has named you as their Successor Trustee, you should get together with them as soon as possible to walk through the Trust. It’s incredibly important that you have a thorough understanding of the assets in the Living Trust and how the Grantor would like them managed and distributed.
It’s also important to understand the Grantor’s healthcare and end of life wishes. You may be responsible for making healthcare decisions on behalf of the Grantor if they become incapacitated and can’t make these decisions on their own.
Lastly, make sure the Grantor tells you where you can find a copy of Living Trust document and who the beneficiaries are that will receive the assets after the Grantor dies.
Are There Other Documents I Should Know About As Trustee?
In addition to understanding the Trust document itself and all of the assets owned by the Trust, there are a few other documents you should ask the Grantor about:
- Medical insurance, life insurance, disability and long term care policies
- Any titles of property that are in the Trust
- Any beneficiary designations on annuities or IRAs
What Are The Responsibilities of a Trustee?
Execute The Living Trust According To Its Instructions
As the Successor Trustee, you need to make sure the Trust is executed the way it is written. This is why it is so important to speak with the Grantor, if possible, to make sure there is no question about their wishes.
Fiduciary Responsibility
As the Successor Trustee, you need to make sure the Trust is executed the way it is written. This is why it is so important to speak with the Grantor, if possible, to make sure there is no question about their wishes.
Distributions
One of the most important responsibilities of a Trustee is to ensure that the beneficiaries receive the assets in the Trust according to the Grantor’s wishes. This is part of the fiduciary responsibility that comes with being a Trustee.
Investments
You need to be prudent when investing money and assets in the Trust. In other words, investments should result in reasonable growth with minimal risk.
Accurate Accounting, Record Keeping, and Reporting
You will be responsible for accurate accounting and record keeping as well. This includes tracking any income, distributions and expenditures by the Trust. Usually, you have to report this information to the Trust Beneficiaries at least once a year or however often the Trust specifies. Lastly, you need to make sure that you keep your own personal assets separate from the Trust Assets.
Filing Taxes
You are responsible for filing an annual tax return for the Trust. This is one of the reasons why accurate accounting and record keeping is so important when managing a Trust. If you are unsure how to prepare and file taxes, you can consult with a Trust Administration attorney.
Reasonable Compensation
As you can see, acting as Trustee can be a lot of work. It’s for this reason that Trustee’s are entitled to reasonable compensation for managing the Trust. You should review the Trust document for guidelines on compensation.
What Should I Do As Trustee If The Grantor Is Incapacitated?
Make Sure The Grantor Is Receiving Proper Medical Care
First, make sure that Grantor is receiving the proper medical care based on their condition. Locate any documents the Grantor left behind that communicates their healthcare wishes. Usually this is a Medical Power of Attorney, Living Will, or both. If someone is named in these documents to make healthcare decisions on behalf of the Grantor, make sure they are notified.
Review The Trust With An Attorney
Next, you should review the Living Trust document with a Trust Administration attorney. The attorney can answer questions you have about the Trust and your responsibilities. They can also help you create a Certificate of Trust – a shortened version that shows you have legal authority to act on behalf of the Trust.
Review Insurance Policies
You are going to want to review any medical, long term care, and life insurance policies that the Grantor currently has. You want to understand how extensive the coverage is to make sure that their medical procedures and expenses are properly covered.
Make Sure Minors And Dependents Are Taken Care Of
If the Grantor left behind minor children or other dependents, you will need to make sure they are being cared for according to the instructions in the Trust.
Audit The Finances
You need to understand what assets are in the Trust because you are now responsible for managing the Trust’s finances. You should find out where all of the assets are located and their monetary values. You also need to be aware of any income and expenses that the assets generate and when expenses need to be paid. As stated before, you will need to document any income and expenses for accounting and reporting purposes.
Apply For Disability Benefits
Apply for any disability benefits the Grantor may be eligible for through their employer, social security, insurance, or the VA.
Notify Banks That You Are Trustee
You will need to notify banks and financial institutions which hold any of the Grantor’s assets that you are the Trustee who now has the legal authority to act on behalf of the Grantor.
Assemble A Professional Team To Manage The Trust
As you can see, managing the Trust on behalf of the Grantor can be a lot of work, but assembling a team of professionals can help.
A Trust Administration attorney is a really helpful resource to help walk you through the process. Also, they usually have a network of accountants, bankers, and financial advisors who help clients with Trust Administration issues.
Once you have all of these bases covered, you will be ready to conduct the day to day business of managing the Trust. This means paying the bills, depositing checks and income, and using any other funds or assets to take care of the Grantor and their dependents.
What Should I Do If The Grantor Passes Away?
If the Grantor passes away, you will be responsible for settling the Trust after their death. Settling a Trust can be very complex and you are legally obligated to make sure it is done correctly. As Trustee, you need to ensure all of the Trust assets are accounted for and distributed in a timely manner. At this point it’s best to contact a Trust Administration attorney…
Consult With A Trust Administration Attorney
Make sure you don’t distribute or sell any of assets before you contact an attorney to review the Living Trust.
Trust Administration attorneys help settle Trusts for a living. They can give you useful guidance on how to do this properly so you can make sure you aren’t violating your fiduciary obligation.
The attorney will also help you understand what information about the assets you need to collect.
In general, they can help you with the following:
- Contact The Grantor’s Family To Notify Them Of Your Role As Successor Trustee
- Identify Any And Help Execute Any Funeral Instructions
- Review The Trust To Inventory The Assets
- Notify Institutions Regarding The Grantor’s Death
- Assemble A Team Of Professionals To Help Settle The Estate
- Pay Any Outstanding Bills And Taxes
- Conduct A Final Accounting Of The Assets
- Distribute Assets To The Beneficiaries Of The Trust
Can I Hire Professionals To Help Me?
Yes. It’s not uncommon for Trustees to hire a Trust Administration attorney, Accountant, Bookkeeper, and Financial Adviser to help.
If you are trying to settle a Trust, our Trust Administration attorneys can help you.
Over the past decade at Rochester Law Center, we’ve helped 1,000s of clients with all matters of Trust Administration, Living Trusts, Wills, and Probate.
Give us a call at (248) 613-0007 to set up a free initial consultation with a Trust Administration Attorney.
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Written By Chris Atallah - Founder, Rochester Law Center, PLLC
Written By Chris Atallah - Founder, Rochester Law Center, PLLC
Chris Atallah is a licensed Michigan Attorney and the author of “The Ultimate Guide to Wills & Trusts – Estate Planning for Michigan Families”. Over that past decade, Chris has helped 1,000s of Michigan families and businesses secure their futures in all matters of Wills, Trusts, and Estate Planning. He has taught dozens of seminars across the State of Michigan on such topics as avoiding the death tax, protecting minor children after the parents’ death, and preserving family wealth from the courts and accidental disinheritance. If you have any questions, Chris would be happy to answer them for you – just call at 248-613-0007.
