Serving as the trustee of a trust can seem like a daunting task. While it can be time-consuming and come with a list of responsibilities, it doesn’t have to be something to stress over. Fortunately, with a little effort you can start to wrap your mind around what the job entails and what you are responsible for. Follow along as we walk you through some of the basic duties and responsibilities of trustees so you know exactly what to expect.
Administering the Trust
The first, and probably most obvious, responsibility of the trustee is to administer the trust according to the terms of the trust. This will include tasks such as notifying the beneficiaries of the trust about the trust administration, collecting trust assets, understanding the various terms of the trust (and seeking help if needed), and ultimately distributing trust assets to the trust beneficiaries. There are two key ideas to keep in mind as you administer the trust: communication and documentation. You want to keep the beneficiaries informed about the trust administration (some notices are even required by law), and you want to make sure you keep detailed records. Following these two simple concepts will get you started on the right foot.
Managing and Investing Trust Assets
As the trustee, you have a fiduciary duty to prudently invest trust assets. This means you must take the time, skill, and care of a prudent person to ensure that trust assets are invested productively. For example, investments should usually be diversified in order to minimize risk. You should also be sure you are properly managing assets such as real estate or business interests. Keep in mind the terms of the trust to ensure you are managing everything according to the settlor’s wishes. If you need help with these tasks, you should consider hiring a professional to advise you on the best path forward.
Accounting for Trust Assets
Going back to the importance of communication and keeping detailed records, another trustee responsibility is to prepare an accounting of the trust assets for the beneficiaries. This means keeping accurate and detailed records of any income, expenses, and other transactions involving the trust. Arizona law requires trustees to report the trust property, liabilities, receipts, and disbursements to the beneficiaries at least annually and at the termination of the trust. Again, if this is something you need help with, consider hiring a professional to assist you.
Distributing Trust Assets to Beneficiaries
One of the final responsibilities of serving as a trustee is, of course, distributing the trust assets to the beneficiaries. You will want to make sure you fully understand the disposition provisions of the trust terms. This step will involve regularly communicating and coordinating with the beneficiaries in order to receive their share of the trust. Another thing to keep in mind as you are making distributions is the final expenses of the trust administration. If there are outstanding expenses that need to be covered (e.g., a final tax return for the trust), make sure you hold back enough money to cover those expenses.
General Duties of Trustees
In addition to the responsibilities above, there are some general duties that trustees owe to the trust beneficiaries that are important to consider. Trustees owe the beneficiaries a duty of loyalty, meaning the trustee must administer the trust solely in the interests of the beneficiaries. The trustee must also avoid conflicts of interest and should not engage in any self-dealing. Along with the duty of loyalty comes the duty of impartiality. This means the trustee must keep in mind the respective interests of the beneficiaries and not unfairly favor or disfavor one over the other. Finally, as we mentioned above, the trustee has a duty to inform and report to the beneficiaries throughout the administration of the trust.
Concluding Thoughts
Acting as the trustee of a trust doesn’t have to be stressful task. While there are a number of duties and responsibilities to keep in mind, you don’t have to go it alone. You should hire professionals to assist you if you feel like you need help. If you would like a helping hand administering the trust of a loved one, schedule a consultation with us to discuss your needs.