What Does a Trustee Do?

What Are the Duties of a Trustee?

A Trustee is an individual who takes care of the assets held by a trust. The trustee is accountable for managing the financed and assets of the trust, and also distributing funds to the beneficiaries according to the instructions of the trust.

In some cases, the individual who creates the trust is also the trustee. However, when this person grows incapacitated or dies, then a successor must take their place.

What are the responsibilities of a trustee? We will cover this in depth further in the article, but here are some of the most important duties of trustees:

• Distribution of funds to beneficiaries
• Keeping record of all transactions involving the trust
• Recording income and expenses
• Filing taxes on the income the trust makes

All of these responsibilities can be summed up by saying that the trustee is the person in charge of overseeing the assets of the trust. They have the final say regarding the trust’s finances, so therefore they must be trustworthy and abide by their fiduciary duty.

The most important aspect of the role of Trustee is ensuring one acts in the best interest of the Trust. When thinking about whom to appoint as Trustee, it’s important to find someone who will be able to put all personal goals aside and follow the instructions as the Trust dictates. For issues concerning allegation of trustee breach of fiduciary duty, please contact our commercial litigation attorney in Los Angeles for a free consultation.

What Are the Powers and Duties of a Trustee?

A Trustee has many roles, but the main purpose is to carry out Trust’s directions. The ultimate goal of any Trust is to protect your legacy. So when thinking about “what does a Trustee do” or “what is the role of a trustee”, it’s easiest to remember there are many aspects to the role. Trustees will be required to do some or all of the following:

• Act as a fiduciary: The role of fiduciary means one is held to a high standard in terms of protecting the investments and distribution of the Trust. Some even feel that a Trustee must pay more attention to the Trust than they do his or her own personal accounts.
• Understand the terms of the Trust and ensure safety of assets: Assets within a Trust must remain safe, so a Trustee should understand the basic terms outlined in the Trust. He or she should know who all the beneficiaries are and have access to and review all the records to ensure they’re in order and accurate.
• Invest assets when necessary: If the Trust dictates, a Trustee should invest assets with the intention of preserving them now and in the future.
• Administer the Trust: Per the Trust direction, a Trustee would need to distribute and/or administer assets to any beneficiaries.
• Make ongoing decisions: As needed, Trustees should be willing and able to make decisions about how and when beneficiaries receive payment, as well as decide on other provisions of the trust. Keep in mind that these decisions are with respect to discretionary powers given to a trustee. For example, Trust & Will’s Trust-Based Estate Plan requires the trustee to distribute all income earned to the beneficiaries. That’s mandatory, so the trustee really doesn’t get any say in it (or at least not much). But, our Trust also says the trustee may give additional distributions as needed. That’s discretionary and the trustee has to determine if it’s a legitimate need and then determine how much to distribute.
• Keep track of records and prepare tax-related forms/filings: In addition to preparing and filing tax returns, Trustees also need to keep financial records and statements organized and filed.
• Communicate with and answer beneficiaries’ questions as needed: Communication can include things such as providing statements and account information and offering an overview of tax reports.
• Answer questions: A big part of acting as Trustee entails finding out the answers to beneficiaries’ questions and then ensuring the information is disseminated appropriately and in a timely fashion.

A Trustee’s duties may also change over time. In most cases, when you create a Trust you are both the Trustee and the beneficiary, and you have more flexibility over what you can and cannot do. That makes sense because you’re responsible for your own self. If you are ever to become incapacitated, or upon your death, the person you name Successor Trustee then steps in.

Commonly Asked Questions

Even after the basic responsibilities of a Trustee are known and understood, there are often several questions that tend to come up. Knowing the answers to some of the following questions can help ease any stress and uncertainty a Trustee may feel as they take on their role.

Is a Trustee Personally Liable?

In general, yes, a Trustee can be held personally liable. He or she must make all decisions in the best interest of the Trust and on behalf of the beneficiaries’ benefits. Trustees can protect themselves by keeping accurate, detailed records of the financial transactions and distributions. And the single best thing a Trustee can do is really have a solid grasp on and understanding of the Trust’s instructions.

What is the Difference Between a Beneficiary and a Trustee?

The difference between a beneficiary and a Trustee is simple. A beneficiary benefits from the Trust, and a Trustee is in charge of it. Trusts are created to benefit someone or something else (often a child or other family member). Trustees are responsible for holding and managing all the assets and property inside the Trust as well as distributing assets as needed to the beneficiaries named.

What is the Difference Between an Executor and a Trustee?

Trustee vs Executor really just has to do with Trusts vs Wills. A Trustee will administer a Trust, handling the assets inside the Trust and distributing or managing them as the Trust directs. An Executor, on the other hand, oversees and manages an estate by distributing a deceased person’s assets as directed by a Will.

Is a Successor the Same as a Beneficiary?

A Successor Trustee is named second in line to serve as Trustee. Most often, the person who creates the Trust is Trustee until he or she is incapacitated or passes away. At that time, the Successor Trustee steps in. If the Successor Trustee is either unable or unwilling to serve the role required, it can be a good idea to name an alternate just in case anything happens to the originally-named person.

How Long Does a Trustee Have to Notify Beneficiaries in California?

A Trustee can essentially have as long as needed to settle a Trust, provided they are acting in a timely manner and as directed by the Trust. Most Trusts take between 12 – 18 months to fully settle and distribute all assets. Generally, it takes at least six months (but often longer) to settle a Trust. The time it takes greatly depends on how complicated the Trust is and what provisions are required, as well as how old the beneficiaries are. Trusts created for the benefit of minor children may be active until the child or children are of a certain age.

How Does a Trustee Get Paid in California?

A Trustee gets paid what would be considered “reasonable compensation” to fully perform the duties necessary. Trustees are paid out of the Trust assets, and occasionally (though not often) the Trust will define what the compensation amount should be.

Understanding the role and responsibilities a Trustee must take on is key in order for the job to be well done. Knowing what’s expected ensures that anyone taking on the task will be able to perform his or her duties to the best of their ability.

If you’ve got an existing Trust that needs to be updated, or if you’re ready to start a Trust for the first time, take a look at what Trust & Will’s Trust-Based Estate Plan has to offer! Learn all about our comprehensive Estate Planning services that thousands of people just like you have used. We make the process simple, effective and affordable, because we believe everyone should have access to Estate Planning that protects their family and their legacy.