I’ve Been Named as Trustee in a Living Trust, Now What?
May 28, 2009 by Lisa
Filed under Estate Planning
As trustee, you will have fiduciary duties to carry out the terms of the trust. A fiduciary is a person who is responsible for taking care of something that belongs to someone else. Under the law, fiduciaries owe legally-enforceable duties to the people on whose behalf they handle property. In this case, you will owe duties to the settlor and beneficiaries of the trust.
Your first duty is to read the trust agreement and administer the trust according to its instructions. In carrying out the terms of the trust, you will have fundamental duties. These include:
1. Duty of Prudence- Your standard of care in dealing with the trust assets is that of a “reasonable person”. You must act as a reasonable person would under the same or similar circumstances.
2. Duty to Carry out the Terms of the Trust- This is self-explanatory. If the trust says distribute the house to Sara, you must make sure the house goes to Sara.
3. Duty of Loyalty- If there is a conflict between yourself and the interest of the trust, you must do what would benefit the trust and its beneficiaries. For example, never sell trust assets to yourself or give yourself a loan with money from the trust.
4. Duty not to Delegate- In performing your duties as trustee, you are not allowed to have someone else carry them out. You may hire a professional to help you administer the trust (such as filing tax returns, investing money) but it is up to you to make sure the terms of the trust are carried out.
5. Duty to Account- You must make sure each beneficiary is informed of his/her interest in the trust.
6. Duty to Segregate Trust Assets- You must not co-mingle trust property with your own!
7. Duty to Get Help if You Need It- Make sure you understand the trust and are able to fully administer it. If you don’t understand it, you cannot carry out your duties. So seek the advice of an attorney if you need to.
8. Duty to Preserve Trust Assets- If you need to get insurance, do it. You don’t want something to happen to the assets and not have any recourse.
This list is by no means exhaustive. The job of a Trustee is tedious and can get complicated. If you decide to take on the role, it is important that you understand the responsibilities involved.
Can a co-trustee of a living trust legally and/or formally designate someone else to carry out their duties on the grounds that they are not capable of handling those duties? If the co-trustee does this and/or simply carries out their duties in accordance with the advice of a potentially adverse party to whom they have transferred their duties, what can the other co-trustee do to stop this and/or have the violating co-trustee removed? Is there such a thing as a “power of attorney” that can be used by a co-trustee to perform such a transfer of their fiduciary duties under the trust and, if so, can that transfer be done without the consent of the other co-trustee?
The trust document should address your concerns.