There was a time when trusts where used almost exclusively by wealthy families to transfer the family wealth from one generation to the next. Today, however, trusts are commonly found in the estate plan of the average person. If you are planning to include a trust in your estate plan, one of the most important decisions you will need to make when creating your trust is who to appoint as the Trustee of the trust. One of the most common mistakes people make when creating a trust is to appoint a spouse, family member, or friend as the Trustee without actually giving due consideration to whether or not that individual is the best person for the job. Given the complex duties and responsibilities of a Trustee, you may be wondering if a trusts lawyer can be your Trustee. The simple answer to that question is “yes.” A better understanding of those duties and responsibilities may help you understand why appointing a lawyer, or other professional Trustee, is often the best decision you can make.
Duties and Responsibilities of a Trustee
In order to understand the importance of choosing the right person to be your Trustee, you need to understand what a Trustee does. Some of the most common duties and responsibilities of a Trustee include:
- Fiduciary duty – a Trustee has a fiduciary duty to all beneficiaries, both present and future, of the trust. A fiduciary duty means the Trustee must use even more care than he/she would with his own assets and investments.
- Duty to follow investment standards – a Trustee must follow the “prudent investor” standard. This requires the Trustee not to invest in risky or speculative investments and to always consider what is in the best interest of current and future beneficiaries of the trust.
- Responsibility to communicate with beneficiaries – the Trustee of a trust has a responsibility to communicate with all trust beneficiaries regarding trust business.
- Responsible for following trust terms – a Trustee must understand, and abide by, the terms of a trust unless they are illegal or unconscionable. The Trustee’s own personal opinion cannot interfere in the administration of the trust.
- Responsible for distributing assets – the trust terms will dictate when, to whom, and how much, assets are to be distributed from the trust. The Trustee is responsible for making sure the distributions are made according to the trust terms. If the Trustee has discretion with regard to making distributions, the Trustee must consider the Settlor’s intent and the best interest of the beneficiaries when deciding whether or not to make a discretionary distribution.
- Duty to prepare and pay taxes – a trust is a separate legal entity. As such, the trust must file and pay any state and/or federal taxes due. It is the Trustee’s duty to see that they are filed and paid.
- Duty to keep records of trust business – a Trustee must keep detailed records of all trust business, including accounting records.
Is a Trusts Lawyer the Best Person for the Job?
As you can see, the job of Trustee involves a number of complex duties and responsibilities. Often, the success, or failure, of a trust will depend on how well the Trustee is able to carry out those duties and responsibilities. Many of them require legal and/or financial knowledge and experience. This is why it is often best to appoint a professional Trustee, such as a trusts attorney, to the position. An attorney has the legal knowledge necessary to perform the job of Trustee well and can secure the assistance of a financial expert if needed to ensure the success of the trust.
If you are creating a trust, take the time to consider the appointment of a Trustee to ensure that you appoint the right person to the job.
If you have additional question or concerns regarding the appointment of a Trustee for your trust, contact the experienced North Dakota trusts lawyers at German Law by calling 701-738-0060 to schedule an appointment.
- Updating Your Life Insurance - September 29, 2022
- What’s Estate Planning Got to do with Interest Rates – Part II - September 27, 2022
- What’s Estate Planning Got to do with Interest Rates – Part I - September 22, 2022