When it comes to the proper functioning of a trust, the trustee has the responsibility to make sure everything works the way it is supposed to. The trustee makes sure to manage the trust’s assets on behalf of the trust’s beneficiaries in accordance with the guidelines in the trust document and any applicable laws and regulations.
An individual trustee need not have any particular professional qualifications, but merely needs the ability to recognize when they may need help and hire cost-effective professionals when needed. A trust creator often acts as the initial trustee and lists family members as potential successor trustees. How much work is involved in being a trustee depends on the complexity of the trust’s purpose and holdings.
For a simple trust, such as an asset preservation trust with basic holdings, the extent of the work may just involve monitoring investments and filing a tax return, if necessary. If the trust has more complex holdings, such as a rental property, the trustee needs to see that the property is managed competently. The trustee can also hire professionals, such as an accountant, investment advisor, or property manager, to provide necessary expertise at a reasonable price.
Being the trustee of a special needs trust involves additional responsibilities. The trustee needs to be able to document expenses, keep receipts, and follow the laws and regulations governing special needs trusts in the applicable jurisdiction. There are specific restrictions, that can vary by state, on what the beneficiary can receive while still maintaining eligibility for government benefits. Trustees must be able to prove that trust expenditures only have been used for acceptable purposes.
While some people may expect that relatives serving as trustees for a family trust would work for free out of kindness, trustees are legally allowed to collect reasonable fees for their time working as a trustee. However, a trustee can be held personally liable for any losses suffered due to mismanagement by the trustee.
A trustee should work closely with an experienced, local attorney who specializes in the relevant area of law to make sure that the trustee understands the trust document, fulfills their duties as trustee, and obeys the applicable laws and regulations governing the trust.
To either help create, or answer questions, about your own trust, please call Martha C. Brown & Associates at (314) 962-0186.