What Are The Duties And Responsibilities Of A Trustee?

Litigation Attorney

Duties of a Trustee?

In California, a trustee has a duty to be transparent to the beneficiaries. From gathering the estate assets, to taking care of taxes, the position of a trustee is essential to making sure the trustor’s wishes are met.

Affidavit Of Appointment

The trustee will sign the Affidavit of Appointment form’s acceptance form and submit it to the appropriate court. You should contact a trust lawyer for assistance with the details of the Trust before you accept your appointment as trustee.

Giving Notice To Beneficiaries

The trustee is responsible for notifying all beneficiaries that they are due to inherit. Each beneficiary should also receive a copy of the final trust document with all of the amendments. Once the beneficiaries receive their notice, they have 120 days to contest the trust instrument.

Open And Maintain A Trust Account

You need to open an interest-bearing trust account with the bank. Deposit all monies of the estate into this account. The trust account keeps all trust money separate so that funds will not become commingled with the trustee’s personal funds. You might want to hire an accountant to keep track of all deposits and payouts.

Inventory Assets

All assets in the Trust should go through the inventory, which is the first step in liquidating the assets.

Liquidate Assets

Liquidate all assets. This step can take some time. The trustee needs to consult with experts as to the value of the assets. It is in the best interest of the trustee to try to get top dollar for each asset. While stocks and bonds can liquidate quickly, a piece of real property will take time. For real property, the trustee will have to select a realtor, prepare the property for showing and sale, list the property, and sell it. In some cases, this step can take several months. The trustee then deposits the proceeds into the trust account.

Identify Creditors

The trustee is responsible for identifying the creditors and paying any outstanding bills for the estate. The trustee is also responsible for paying any owed taxes. The Trust also pays for any fees related to the asset liquidation. The trustee receives a small compensation for their time and effort.

Accounting Report

The trustee will submit an accounting report to the appropriate court. The court communicates a timeline for this submission. It is essential always to meet any court-ordered deadlines. Share the accounting report with the beneficiaries.

Trustee Duty To Distribute

As soon as you pay all the creditors and all assets are liquid, the trustee pays the beneficiaries their inheritance. The trustee’s duty to distribute specifies that you should distribute the funds in a timely manner. Once all funds are disbursed, the trustee then closes the Trust.

Final Report

The trustee submits a final report to the court showing that you have paid all beneficiaries and closed the Trust.

Trustee Duties For An Irrevocable Trust

The duties of a trustee of an irrevocable trust should be performed to the trust instrument’s letter. In an irrevocable trust, the trustee cannot make changes to the final distribution of funds. If the trustee runs into a situation where changes are necessary, they will petition the courts for further instruction. The courts will weigh the evidence and come to a decision clarifying the instructions. Your trust lawyer can help you file your petition for instruction.

Illegal Actions

A trust can be contested if the beneficiaries or the courts believe that a trustee breaches their fiduciary duty to the Trust. The courts require extensive evidence to rule on contests of a Trust. Grounds for contesting a trust and the reasoning behind them include:

• Misappropriation of funds. The beneficiaries suspect that you are mixing funds from the Trust with your personal monies; they can contest the trustee on these grounds.
• Personal Gain. The beneficiaries believe that your actions result in you benefiting from the Trust beyond your compensation.
• Lack of Mental Competency. The beneficiaries or the trustee believe that the grantor may have lacked the mental acuity when preparing the trust instrument.
• Undue Influence. The beneficiaries or the trustee suspect that someone used undue influence on the grantor during the preparation or amendment to the trust instrument.
• Timely Distribution. If the beneficiaries believe that the distribution of their inheritance is taking too long. The law requires trusts to be disbursed in a timely manner.
• Dereliction of Fiduciary Duty. If the beneficiaries believe that the trustee is not acting in the best interest of the Trust.

When To Seek Legal Counsel

A newly appointed trustee should have legal guidance as they become accustomed to a trustee’s duties and responsibilities. Since the trustee role definition is precise, your trust lawyer can guide you to a trustee’s duties of an irrevocable trust. If there are any conflicts of interest at any time during trust administration, your trust attorney can help you address them. If anyone contests your position as trustee, your trust attorney can help you navigate the court process.

Trustee and Co-Trustee Conflict

When there is a conflict between the trustee and co-trustees, then the beneficiaries may petition to remove one or both in court, but again, it takes court action, which costs a lot of time and a lot of money. Even then, you may not know how the court will rule in the trust affairs. Therefore it may not go as planned.

Are you a Trustor?

If you are a trustor, then you may want to consider having the Trust name the co-trustees to act independently that is, act alone without both signatures. Logistically, if the trustees can work independently, then the trust administration process can be completed on time. For example, if a trustee goes out on vacation or is incapacitated, the other trustee can continue with only one signature needed to get everything completed and distribute the estate to the beneficiaries.

Take into consideration under California probate code section 15620 should be unanimous action to c0-trustees unless otherwise provided in the trust instrument. Your estate planning attorney should insert a particular language specifying and allowing for actions by one or the other co-trustee.

What is Unanimous Action

If the specific wording is not included in the original trust instrument or an amendment, then section 15620 requires “Unanimous action.” One can consider this as a majority rules clause.

When Co-Trustee Don’t Agree

What happens if the co-trustees can’t agree? If the co-trustees cannot agree, then any of them can file a petition for instructions under California probate code 17200, which will ask a judge of the superior court to guide the co-trustees. When a co-trustee petitions for instructions, all co-trustees and beneficiaries should be notified.