Acting as trustee of a trust is a significant responsibility. People should take care when selecting individuals to be trustees or accepting the role of a trustee.
At a basic level, the trustee manages trust assets for the benefit of the trust beneficiaries according to the terms of the trust.
Trustees are expected to prudently manage trust assets. Trustees should have the fiscal competence to manage investments with an eye toward achieving some degree of growth while minimizing risk. The trustee must also ensure that the trust has the ready assets to perform the present duties listed in the trust document. In the case of a special needs trust, a trustee’s duty may be less to ensure growth indefinitely into the future, but instead to manage the trust assets so that they provide for the trust beneficiary during their lifetime.
Trustees are also responsible for filing and paying taxes that may be owed by the trust and preparing a regular accounting of trust assets, if needed.
If a trustee cannot personally perform all of these duties, a trustee may hire outside professionals to manage investments, prepare taxes, and perform accounting duties. Even with outside help, the trustee must still provide accurate information to the outside professionals and provide guidance for any discretionary decisions. One potential downside to hiring outside help is that the trustee is personally responsible for any mistakes and mismanagement by outside advisors.
Trustees are also forbidden from what is called “self-dealing.” Trustees may not borrow from the trust, mix their own assets with trust assets, or use trust assets for their own purposes.
One alternative to individual trustees is to select a professional trust company or institution to act as trustee. One major downside of a professional trustee is cost. Trust companies generally work for a fee based on a percentage of total trust assets. Another potential downside is less personalized service since most trust companies manage many trusts at any given time.
Individual trustees, especially a trusted family members, may be more willing to work for free and act with familial care, but come with the risk of lower expertise compared to professional trustees.
To determine the potential trustee needs and other details of your future trust, please call Martha C. Brown & Associates at (314) 962-0186.