One of the most common additions to a well thought out and comprehensive estate plan is a trust. A trust can be used to help accomplish a wide range of estate planning goals, such as incapacity planning, asset protection, and probate avoidance. When you create a trust, you will need to make a number of important decisions. Among the most important of those decisions, however, is the appointment of a Trustee. Unfortunately, people often spend very little time deciding who to appoint as a Trustee which then leads to the failure of the trust down the road. Part of the problem is that most people do not understand the numerous and varied duties and responsibilities a Trustee has. To ensure that you do not make the mistake of appointing the wrong person as Trustee, a Grand Forks trust attorney explains the role of Trustee.
Trust Elements
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Trustor, who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. To create a trust, therefore, you need the following elements:
- Trustor– the individual who creates the trust.
- Trustee – the person, or entity, that manages the trust property and oversees the administration of the trust.
- Beneficiary – the individual, entity, or even pet, that receives the benefits of the trust. Beneficiaries can be current and/or future and may be charitable and/or non-charitable.
- Terms – created by the Trustor, the trust terms dictate how the trust assets are managed, invested, and disbursed.
- Funding – almost any type of assets can be used to fund a trust, including, but not limited to, cash, securities, and/or real property.
Duties and Responsibilities of a Trustee
When creating a trust, people often appoint a spouse, friend, or other family member as the Trustee based solely on the fact that they “trust” the individual. While you certainly do need to trust your Trustee, the duties and responsibilities of a Trustee require more than simply a level of trust. Just a few of the duties and responsibilities of a Trustee include:
- Managing trust assets – the Trustee is responsible for securing and managing all trust assets for the duration of the trust’s existence. The Trustee has a fiduciary duty to the trust with regard to the trust assets as well.
- Investing trust assets – the Trustee is required to use a “prudent investor standard” when investing trust assets which essentially means that the Trustee must not take risks with trust assets and must be even more careful with those assets than he/she would be with his/her own assets.
- Abiding by trust terms – a Trustee has a duty to abide by the trust terms as created by the Trustor unless a term is illegal or unconscionable. A Trustee cannot allow his/her own personal opinion to impact the performance of his/her duties as Trustee.
- Communicating with beneficiaries – the Trustee must communicate on a regular basis with the beneficiaries of the trust and keep them apprised of trust business.
- Resolving conflicts – if conflicts arise among the beneficiaries or with regard to trust terms, the Trustee is often required to mediate those conflicts or disputes.
- Keeping detailed records – a trust is a separate legal entity. As such, detailed records regarding trust business must be kept by the Trustee.
- Paying taxes – because a trust is a separate legal entity, the trust must prepare and pay taxes each year. The Trustee is responsible for ensuring that any tax obligation due from the trust is paid.
How Can a Grand Forks Trust Attorney Help?
If you are contemplating the addition of a trust to your estate plan, you should discuss your options with an experienced Grand Forks trust attorney. A Grand Forks trust attorney can also help you decide who to appoint as the Trustee of your trust to ensure that you appoint the right person for the job.
Contact Us
For more information, please join us for an upcoming FREE seminar. If you have additional questions about the role of a Trustee, contact the experienced trust attorneys at German Law by calling 701-738-0060 to schedule an appointment.
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