Those who have been invited to be a trustee for someone’s trust often smile and nod yes, perhaps quickly changing the subject. As a result, they tend to overlook what such a decision actually means. You should certainly feel honored that the person trusts and respects you enough to name you as trustee, but what exactly is it that you’ve just said “yes” to?
Taking on the role of a trustee is a big deal, and you can alleviate a great deal of stress and confusion by knowing what’s involved. So, what does a trustee actually do? Here’s what you need to know, as well as some steps to take now to ensure that you’re not overlooking anything.
Basic Trustee Responsibilities
A trustee’s responsibilities can be many and varied, depending on the specifics of the trust. The largest task assigned to a trustee is to administer the trust according to the terms that have been laid out for it. The trustee communicates with those who have been named as beneficiaries regarding trust activities that relate to them, serving as the main point of contact throughout. He or she will invest/manage trust assets, paying any associated taxes and fees. In most cases, the trustee will serve as an accountant for the trust, handling liabilities, assets, receipts, and disbursements.
Trustees may also find themselves coordinating with the trustor’s executor and involved in the probate process after the trustor passes away. This can occur if the trust is a “revocable” or “living” trust and estate assets are not fully transferred to the trust before the trustor has passed away. This is why it’s so important to ensure that the trust is properly coordinated with the rest of the trustor’s estate plan.
If you’ve been named a trustee, chances are you don’t know where to start. The most important thing you can do first is to find out when your responsibilities will begin. Typically, if the trust is a revocable or living trust and you’ve been named as a backup or “successor” trustee, your tasks as a trustee don’t begin right away. The creator of the trust is usually still alive at this point and will be acting as the initial trustee. In this case, the person named as successor trustee will take over in the event of the trustor’s passing. This isn’t always the case, however, as an irrevocable trust may require you to begin your responsibilities immediately.
Next, you’ll want to find out exactly why you’ve been named a trustee and what the goal or goals of the trust happen to be. Details here can vary significantly, and the course of the trust often depends upon a thorough understanding of its purpose. An irrevocable trust, for example, may be created with the sole purpose of providing education or other types of benefits to a specific person or group. Gaining clarity over why the trust was created and what purpose it serves will assist you in carrying it out as effectively as possible.
Finally, you’ll want to obtain a copy of the trust agreement, internalize its terms and understand the different assets that will be contributed to the trust fund. A living trust will typically control homes, investments, life insurance and even business assets or rental properties. If you’ve been named as a successor trustee, you’ll benefit from learning about each asset that will be added to the trust fund so that you know how to manage them when the time comes. Those who have been named as a trustee and must begin their responsibilities immediately will need to have this information at their fingertips so as to make the right decisions.
Being named a trustee can be somewhat anxiety-producing, especially if you’re not sure what you’ve gotten yourself into. Take a moment to seek clarification, however, and your responsibilities will likely feel less like a burden and more like an honor.