Great! I’m a Trustee – Wait . . .
I’m a Trustee?
"To be trusted is a greater compliement than being loved."
~ George MacDonald
By James Miskell, Attorney at Law
Being appointed as trustee is a very real demonstration that you are seen to be trustworthy, that you have the judgment and ability to handle responsibility. It is a great compliment - And make no mistake, being a trustee is also a great responsibility. A trustee holds legal title to property for someone else – the beneficiary.
Beneficiaries can be one or more people or can be a foundation or charity. Trusts are created to address situations where, for any number of reasons, it is not desirable for the beneficiary to directly own the property which is subject to the trust. These can include trusts for minors or for those with special needs. Trustees can be an individuals or institutions like banks.
Trustees are responsible for acting in good faith in the best interest of the beneficiary. Trustees have a duty to act in a fiduciary capacity. This means all business that a trustee conducts relating to the trust property must be solely for the benefit of the beneficiary and cannot be undertaken to benefit the trustee. The trustee should not borrow money from the trust or receive any of the funds from the trust except in his or her capacity as trustee.
Here are some basic guidelines for Trustees:
Read the Trust. The terms of the trust will spell out the specific duties and responsibilities of the trustee, as well as name any current or (potential) future beneficiaries. The trust itself tells the trustee what to do with the property in the trust -- who gets to benefit, when, and how.
Keep Separate Trust Account(s). Trustees must not comingle their personal funds with those that they hold in trust for the beneficiary. To make it easy to disburse funds and pay expenses, it is useful to have a checking account in the name of the trust.
Keep Complete Records. It is important for the trustee to keep thorough records documenting the use of the property in the trust -- this means bank and financial records so that a full accounting can be done. The trustee should be able to provide a complete financial picture of the trust, showing principal held, distributions made, and income generated.
Know the Beneficiaries. Trustees need to be familiar with the beneficiaries to be able to assess their needs. The trustee’s obligation is to ensure that the trust is maintained and funds are distributed only in such a way as to enhance the beneficiary’s well-being.
Make Appropriate Distributions. Trusts can provide for distributions to be made at predetermined times in predetermined amounts or can leave some or all of the discretion in the hands of the trustee. Discretionary distributions should be made only after consideration of all relevant factors and only in accordance with the provisions of the trust document.
Administer Wisely. The trustee is charged not only with making distributions when appropriate and managing well the property in the trust, but also with attending to all administrative and legal obligations as well as seeing that any applicable taxes are filed and paid. These administrative costs of the trust are not the responsibility of the trustee, but are paid out of the property held by the trust.
Above all, trustees should not try to do everything themselves. Individual trustees are not expected to be expert in every aspect of the responsibility given to them and should delegate any and all functions which could be performed better by someone else at reasonable cost to the trust. Each situation has its own particular demands, and as with other aspects of estate planning and asset management, consultation and reliance upon the professional expertise of Financial Advisors, Accountants, and Attorneys should be the first step toward success.
James M. Miskell received his law degree from the University of Georgia in 1993. His Asset Protection and Estate Planning Law practice is located in Lawrenceville, Georgia. He offers free educational workshops and consultations to assist clients as well as fellow professionals in creating individualized solutions.