The Responsibilities of the Trustee for a Living Trust in Indiana

By Lisa S. Kramer

A trust is an estate planning document that transfers property of the trust's creator, known as the “settlor,” to the trustee for the benefit of a beneficiary named in the trust document. A trust is considered a living trust when it is created and takes effect during the settlor’s lifetime. A living trust can either be revocable or irrevocable. In a revocable living trust, the settlor can amend or revoke the trust anytime during his lifetime. In Indiana, the trustee's duties are set forth in the Indiana Trust Code.

A trust is an estate planning document that transfers property of the trust's creator, known as the “settlor,” to the trustee for the benefit of a beneficiary named in the trust document. A trust is considered a living trust when it is created and takes effect during the settlor’s lifetime. A living trust can either be revocable or irrevocable. In a revocable living trust, the settlor can amend or revoke the trust anytime during his lifetime. In Indiana, the trustee's duties are set forth in the Indiana Trust Code.

Administration of the Trust

According to Indiana law, a trustee has a duty to administer the trust according to its terms. This is the trustee’s primary duty; however, a trust is prohibited from instructing the trustee to commit an act that is illegal or contrary to public policy.

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Trust Property

A trustee also has a duty to take possession of and maintain control over trust property and preserve it, subject to the terms of the trust document.

Accounting, Recordkeeping and Inventory

The Indiana Trust Code sets forth the trustee’s accounting, record-keeping and inventory duties. Under the Code, the trustee must maintain an accurate trust accounting record of all receipts and payments. She also must create a list of all trust property and specify its nature (for example, describe it as cash, real estate, etc.), the date the property became a trust asset and value of the property on that date. Unless otherwise specified in the trust document, the trustee most provide the trust beneficiaries with a written statement of accounting once a year. This statement must include all receipts and payments since the previous year’s statement of accounting and a current list of all trust property at their inventory value.

Investments

Indiana is one of many states that has a "prudent investor" rule. The rule requires a trustee to invest and manage trust assets as a prudent investor would, by considering the purpose, terms, distribution requirements and other circumstances of the trust. This standard requires the trustee to exercise reasonable care, skill and caution.

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What Happens When a Trust No Longer Has Assets?

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Enforcing a Trust

A trust is a legal relationship in which a trustee holds property for beneficiaries, who are the individuals benefiting from the trust. The trustee must abide by the terms of the trust to manage property and distribute it to the beneficiaries. The person who creates a trust is known as the settlor, or grantor. The settlor can also serve as the trustee, naming a successor trustee who will take over for him following his death. Alternatively, the settlor can name someone else to serve as the trustee at the time he creates the trust. A trustee owes certain duties to the beneficiaries -- and the beneficiaries have a right to enforce the terms of the trust and hold the trustee in breach of his duties if he is performs any wrongful acts or omissions that affect their interests.

What if You Violated an Irrevocable Trust?

The person appointed to oversee an irrevocable trust must act according to the terms of the trust and in the best interest of those who benefit under the trust. While all states recognize this duty, the type of recourse available in cases of breach can vary. Knowing when you may petition the court for removal of a trustee and when he may be personally liable for financial losses will help ensure that your trust operates according to the wishes of its creator.

Trustee Duties for a Revocable Trust After Death

When a grantor creates a revocable trust, he must appoint a trustee to manage or administer the trust. Trustees have fiduciary duties, meaning they must always administer the trust in the best interest of the beneficiaries and pursuant to the terms of the trust document. Moreover, if the trust doesn’t terminate upon the death of the grantor, the trustee continues to be responsible for these duties pursuant to the terms of the trust document.

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