Dear Angel,
My mother, Alice, asked me to be the successor trustee for her Revocable Living Trust. Before I accept the responsibility, I want to know more about what it entails. Do you know about the duties of a trustee and can you briefly describe them?
Thanks!
Watson Volved
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Dear Watson,
Having been asked to be the trustee of your mother’s trust is a strong vote of confidence about your judgment. Keep in mind, however, that it is a major responsibility.
The following is a brief overview of a trustee’s duties:
1. Fiduciary Responsibility. Fiduciary duty is a legal responsibility to act solely in another party’s best interests. By accepting fiduciary responsibility, a trustee may not profit in his or her role, unless the trustee has express informed consent, and must avoid any conflicts of interest.
2. Abiding by the Trust’s Terms. The written trust document is the trustee’s roadmap, and he or she must follow its directions, whether about when and how to distribute income and principal, or what reports need to be made to beneficiaries.
3. Investment Standards. With a revocable living trust, a trustee’s investments must generally be prudent, and not speculative or risky, and they must take into account the interests of both current and future beneficiaries.
4. Distributions. Where a trustee has discretion as to whether or not to make distributions to a beneficiary, he or she must take into account the size of the trust, and will need to evaluate the beneficiary’s current and future needs and other sources of income, and responsibilities to other beneficiaries before making a decision.
5. Reporting. A trustee’s job also involves keeping track of principal, income, distributions, and expenditures by the trust. He or she should check the terms of the trust to know how often he or she must report this information to the beneficiaries.
6. Taxes. The trustee will have to file an annual tax return and may have to pay taxes on behalf of the trust.
7. Delegation. While a trustee typically cannot delegate his or her responsibility as trustee, he or she can delegate all of the functions described above. He or she can hire financial advisors to make investments, accountants to handle taxes and bookkeeping for the trust, and an experienced Elder Law attorney to advise on questions of interpretation.
8. Fees. Trustees are entitled to reasonable fees for their services. Family members often do not take fees, though that can depend on the work involved in a particular case, the relationship of the family member, and whether the family member trustee has been chosen due to his or her professional expertise.
Acting as trustee can be gratifying, but as you can see from the responsibilities described above, it can be a lot of hard work, so be sure to think it through carefully before accepting the role. However, keep in mind that being the successor trustee of a Revocable Living Trust is a thousand times simpler than being the Executor of a Will (see our recent blog post about the difficulties of being an Executor).
Best of luck,
Angel
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