What Is The Role Of A Trustee?
What is a Trustee?
The trustee is the person named in the trust who has the authority to control the management and use of the trust assets. The trustee is responsible for the proper investment and management of the trust assets. The trustee is also responsible for expending or applying the trust property to provide for the trust beneficiaries according to the instructions contained the trust document
Who May Become a Trustee?
Any adult individual may serve as a trustee of a trust. Also, institutions like banks or trust companies commonly serve as trustees.
Typically, if a trust is a revocable trust, the person creating the trust (known as the “grantor”) names himself or herself as the trustee so as to maintain control and use of the trust assets during his or her lifetime. If the trust is an irrevocable trust normally a third party other than the grantor will be named as the trustee. Irrevocable trusts are typically created to achieve estate tax planning or asset protection objectives, and these objectives are often jeopardized if the grantor also serves as the trustee.
What are the Duties of a Trustee?
The role of a trustee is to manage and expend the trust assets in the best interests of the beneficiaries of the trust. Accordingly, the trustees duties in doing so include properly investing the trust assets, paying the expenses of the trust, filing trust income tax returns and expending the monies on behalf of the beneficiaries according to the instructions for doing so contained in the trust document.
What is the Successor Trustee?
The successor trustee is the party who will serve as trustee if the original trustee becomes mentally incapacitated, dies, resigns or is otherwise unable to continue to serve a Trustee. Generally, the trust instrument itself will name the people to serve as successor trustees if the original trustee can no longer serve. When that happens, the persons named as successor trustees step into the shoes of the original trustee with the same authority and responsibility as the original trustee.
In some cases there is no successor trustee named in the trust instrument or all who are named are unable to serve. In that case the law provides procedures for appointment of a successor trustee. A trust will never fail for lack of a trustee.
Can a Trustee Be Held Liable for Not Properly Carrying Out their Duties?
Yes, trustees may be held liable for not properly carrying out their duties. For example, if a trustee invests trust assets in an unwise manner resulting in a large loss that would not have occurred had the assets been invested in a prudent manner, a court could order the trustee to repay the trust for its loss. Likewise, if a trustee does not properly provide for beneficiaries, the trustee may be held liable to the beneficiaries for any support they didn’t receive.
Is Being a Trustee a Thankless Job?
Being a trustee should never be a thankless job. A person should never accept the office of serving as Trustee unless it is a role they want to play. Being a trustee is a lot of work. But rather than being thankless, a trustee instead finds satisfaction in helping to improve the lives of the beneficiaries. Also, a trustee is entitled to fair compensation for serving in that role.
How is The Trustee’s Compensation Determined, and Can it be Changed or Waived?
Often, the trust document will include a provision for how the trustee is to be compensated. It can be something as simple as saying the trustee entitled to reasonable compensation. In that case, the trustee might be compensated based on the time it takes to perform his or her trustee duties at a reasonable hourly rate. If the trustee is a bank or trust company, the trust will normally provide that the bank or trust company is entitled to compensation according to its published fee schedule. If the trust document provides for reasonable compensation, a trustee will often use a trust company published fee schedule as a starting point in determining what is reasonable.
The trustee can always waive compensation. It’s common to waive compensation in situations where the trustees are immediate family members of the beneficiaries or the beneficiaries themselves have been named as trustees.
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