Trustee Duties and Responsibilities www.yourestatematters.com 1

TRUSTEE DUTIES

AND

RESPONSIBILITIES

Whether You Plan to Create a Relatively Simple Pet Trust to Provide for the Family Pet or a Complex, High Value Trust

that Will Hold All of Your Assets, Your Trustee Is Often the Key to the Success, or Failure, of Your Trust

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Trusts, however, are a common addition to a comprehensive estate plan because of the flexibility trusts offer and the varied and numerous goals and objectives that can be satisfied with a trust.

Although your Last Will and Testament serves as the foundation for your overall estate plan,

your plan will likely include numerous other estate planning documents, tools, and strategies.

Exactly which documents, tools and strategies you choose to include in your estate plan will

depend on your unique goals and objectives. Trusts, however, are a common addition to a

comprehensive estate plan because of the flexibility trusts offer and the varied and numerous

goals and objectives that can be satisfied with a trust.

Over the past century trusts have evolved

to the point where there is a specialized

trust to fit just about any estate planning

goal. All trusts, however, share a few basic

elements necessary for creation. One of

those elements is the appointment of a

trustee. People frequently make the

mistake of choosing a trustee for their trust

without taking sufficient time to

contemplate the choice. Whether you plan

to create a relatively simple pet trust to

provide for the family pet or a complex, high value trust that will hold all of your assets, your

trustee is often the key to the success, or failure, of your trust. A better understanding of the

duties and responsibilities of a trustee may impress upon you the importance of choosing your

trustee wisely.

Trust Basics

At its most basic, a trust is a legal arrangement wherein a third party holds something of value

for you for the benefit of one or more beneficiaries. If you ask your sister to hold onto a family

heirloom until your niece is old enough to appreciate and care for the heirloom, you have

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created a basic trust. All the elements necessary for the creation of a trust are present. Those

elements include a grantor, trustor, settlor, or maker (You) to set up the trust, a trustee to

administer the trust (Sister), trust assets (Heirloom), and a beneficiary (Niece). The terms of

your trust are very simple – that the Trustee hold the trust assets until the beneficiary is of age

to appreciate and care for the trust assets.

Who Can Be the Trustee of Your Trust?

In a revocable living trust almost anyone can be appointed as the Trustee, including the grantor

or even a beneficiary of the trust. For irrevocable trusts the rules change because important

tax and/or asset protection benefits can be lost if the grantor is also the Trustee of the trust.

While there are reasons why you would set up

a trust and name yourself as the Trustee, such

as if the trust is being used for incapacity

planning purposes, we are going to focus on

trusts wherein the grantor is not named as the

Trustee. In general, that typically leaves two

broad categories of potential trustees – family

members/friends and professional trustees.

Professional trustees include banks, attorneys, and companies that specialize in acting as

trustees. The pros and cons of both categories will be discussed later.

What Does the Trustee Actually Do?

The trustee of your trust actually does much more than you probably realize. In fact, trustee

duties and responsibilities are varied and numerous. As a general rule, the more complex the

trust and the more assets held by the trust the more difficult and time-consuming the job of

trustee is; however, even a trustee of a small pet trust has a legal obligation to perform a

number of duties and responsibilities. Some of the more important of those duties and

responsibilities include:

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Trust Terms –the terms of a trust dictate how the trust is to be administered, how

assets are to be invested, and how distributions are to be made and to whom.

Unless a trust term is illegal or unconscionable, the trustee is legally obligated to

follow each and every term of the trust. A trustee may have wide discretionary

powers or very little discretion. Only when the trust gives the trustee discretion

can the trustee use his or her own judgment regarding a trust matter.

Fiduciary Duty – a trustee is in a fiduciary role with regard to any current and

future beneficiaries of the trust. As a fiduciary the trustee is held to the highest

possible standards with regard to investments and asset management. The trustee

is legally obligated to act in the best interest of the beneficiaries at all times.

Investments must be made using the “prudent person” standard, meaning the

trustee must be even more careful with trust assets than he or she would be with

personal assets. Risky investments cannot be made with trust assets.

Accounting and Taxes – a trustee must keep very careful records of all trust

business. Investment records, distribution records, and expense records must be

meticulously kept by the trustee and provided to the beneficiaries on a regular

basis. Taxes may also need to be paid on the trust. The trustee is required to

understand the tax laws applicable to the trust and to file all required tax returns

on an annual basis.

Duty to Beneficiaries –the trustee has a duty to keep beneficiaries, both present

and future, informed of all trust business. The trustee is also required to make

distributions to beneficiaries according to the terms of the trust. If the trustee has

discretionary powers with regard to distributions, the trustee must also make

decisions when a request to make a distribution by a beneficiary is made.

Family Trustee vs. Professional Trustee – Pros and Cons

It should be clear by now that the duties and responsibilities of a trustee are diverse and

numerous. Even a small trust requires a certain amount of knowledge, skill, and time to

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administer. People often make the mistake of naming a spouse/adult child/friend as the

trustee of a trust without giving sufficient thought to what is actually required of the trustee.

That is not to say that it is always a bad idea to name a non-professional trustee; however, you

should consider the pros and cons before doing so.

Family trustee pros – trust factor, knowledge of the beneficiaries and family

history, proximity to beneficiaries (sometimes), less expensive.

Family trustee cons –lack of experience and knowledge of law/rules, may not

have the time required for the job, can create conflict within the family,

death/incapacity is possible.

Professional trustee pros – experience, knowledge of applicable laws and IRS

rules, time factor is not an issue, no possibility of conflict.

Professional trustee cons –impersonal, costly.

Ultimately, only you can decide who to name as the trustee of your trust after sufficient

consideration and a lengthy consultation with your estate planning attorney. The important

thing is that with a better understanding of the duties and responsibilities that go along with

being named a trustee you should feel better prepared to make the decision.

References

American Bar Association, Choosing the Executor or Trustee

Edward Jones Trust Company, Fundamental Duties of a Trustee

EstatePlanning.com, Understanding the Duties and Responsibilities of a Trustee

Elder Law Answers, A Brief Overview of a Trustee’s Duties

NPC, Duties of a Trustee

Trustee Duties and Responsibilities www.yourestatematters.com 6

Estate Planning and Elder Law Attorneys in St. Louis, MO St. Louis Estate Planning Attorneys: Planning for Your Future Today

Missouri Estate Planning attorneys Amen, Gantner & Capriano, Your Estate Matters, L.L.C. are

here to help you with legal issues regarding St. Louis Elder Law, Veterans Aid and Assistance,

Probate, Wills, Trusts, Trust Administration, Powers of Attorney, Health Care Directives, LGBT,

and all things required to establish a proper estate plan for the future of both you and your loved

ones. Our law firm understands the varying dynamics of modern families and seeks to address

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of those who may be otherwise legally obliged to it. Estate planning can be a big project that

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Amen, Gantner & Capriano, Your Estate Matters, L.L.C. 10805 Sunset Office Dr., Suite #100

St. Louis, MO 63127 Phone: (314) 966-8077

www.YourEstateMatters.com

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