What does a Trustee do?

• In a trust, a trustee acts as a custodian for the assets
• The Trustee manages and administers Trust funds according to the grantor’s instructions
• As part of its responsibilities, the Trustee must keep track of expenses and income, distribute funds to beneficiaries, and file taxes; among other things
• Simply put, the Trustee is the named person who manages a Trust’s assets
• Trustees can be individuals or organizations who hold and manage trust assets or property

Requirements of Trustee

• Trustees must act in the trust’s best interest.
• To follow the trust’s directives, the Trustee must set aside all their personal ambitions
• As a trustee, you owe fiduciary duties to the beneficiaries of the trust

Trustees handle everything

• The specific duties of a trustee differ depending on the amount and type of assets being held in trust, as well as with the agreement between the Trustee and the beneficiary
• A trustee, for example, is in charge of overseeing real estate assets if the trust consists of various pieces of property
• Additionally, trustees must manage all investments that form a trust, like equities in brokerage accounts

Trustee income

• Trustees are entitled to receive payment under California Probate Code *15680 if specified in a trust document
• The trustees of a trust are not allowed to take assets from the trust-this can trigger an embezzlement claim

Trustee of a Trust

• It is common for trust trustees to be a beneficiary, close relative, accountant, or another advisor to the deceased.
• In advanced trusts, the Trustee is a professional third party, e.g., bank or lawyer.
• Trustees are accountable for all the trust assets.

Trustees can get expert help.

• If, as a trustee, you need advice along the way, you certainly should get it
• You can pay for expert help using trust assets
• If you plan on doing most of the work yourself, then you may need to retain a savvy trust administration attorney
• You may also want to hire a tax preparer or accountant to help file the trust’s tax return

Common trustee challenges

• The bad blood between a trustee and the beneficiaries: you won’t have an easy time managing trust if you don’t get along with those you are managing
• Not knowing what assets the grantor owned/assigned to the trust: roll up your sleeves for a lot of detective work.
• Threats of lawsuits or lawsuits in progress: trustees are obligated to defend the trust from cases that may reduce its value
• Bad debts: trustees should also collect funds owed to the trust
• Co-trustees issues: trustees are generally required to approve every decision together, so this complicates things further.

What Does a Trustee Do?

• Trustees have many duties, but their primary purpose is to execute the directions of the trust
• As a fiduciary, the Trustee protects investment portfolios and oversees all trust distributions
• Trustees should even put more emphasis on the trust than on their accounts
• The Trustee protects the trust’s assets through understanding the trust’s terms
• Beneficiaries should have access to and review all records, so they can be sure they are accurate and in order

Trustee investments and distributions

• As necessary, the Trustee invests assets for the future
• A Trustee is required to distribute, administer, and distribute assets per the direction of the trust
• Trustees make decisions on how and when beneficiaries will receive payments and other issues about the trust as needed
• Trustees are vested with discretionary powers concerning making marginal distributions when they determine a critical need
• Record-keeping and tax preparation are essential responsibilities for Trustees

Trustees report to beneficiaries

• Trustees provide beneficiaries with information, such as tax reports and account statements
• They standby to answer all their questions
• Providing timely and appropriate information to beneficiaries is an essential part of acting as a trustee

Trustee and Beneficiary

• Trust beneficiaries are people who will receive assets from the trust
• The beneficiaries are individuals and entities the grantor personally knows and supports
• Beneficiaries are typically family members or close friends when a person is involved
• In most cases, the vision and philosophies of the beneficiary align with those of the grantor
• In addition to primary beneficiaries, there are also principal beneficiaries such as charity organizations
• Depending on the number of beneficiaries named in the trust, the labels indicate the order of distribution
• Attorneys who specialize in trusts can help to oversee a fair and compliant distribution

Trustees owe a fiduciary duty to beneficiaries.

• Trustees will disburse trust funds and assets to beneficiaries either outright (all at once) or through installment payments over time
• The beneficiaries are provided with the assets of the trust, but the Trustee manages those assets
• Since the Trustee controls assets that benefit those it serves, they have legal obligations to comply with
• Trustees should treat beneficiaries fairly
• The Trustee should act for the benefit of the trust, not for their benefit

Trustee vs. beneficiary

• The beneficiary’s primary responsibility is to receive what the grantor assigned
• This requires that the beneficiary is familiar with the trust deed’s terms
• Beneficiaries need to work with trustees to receive benefits
• In some cases, beneficiary taxes will be due on the trust items provided by the grantor
• Trustees act in the interests of grantors and beneficiaries
• Trustees must be familiar with the trust’s terms and provide beneficiaries with information about their rights
• Sometimes, they may need court or government documents to transfer trust items to beneficiaries
• The Trustee must maintain records to demonstrate that he/she acts in the beneficiary’s best interests and follows the terms of the trust
• As a trustee, you may also need to be a Jedi; to defend the trust in court when beneficiaries or creditors challenge its terms or existence

 Trustee as Beneficiary

• Can a Trustee Also Be a Beneficiary?
• Trustees are often also beneficiaries in most family trusts.
• Almost always, the surviving spouse becomes both the Trustee and beneficiary of a family trust created by two spouses.
• A parent’s adult child is generally the Trustee and beneficiary regardless of whether other children are present.

For expert legal assistance on trust administration, trust litigation, or collaborative dispute resolution in estate planning, call Hess-Verdon at (949)706-7300.