What Is the Power of a Trustee in a Testamentary Trust?

By Erika Johansen

In a testamentary trust, the trustee's function is to serve as guardian and manager of trust assets. The trust document will often describe specific powers granted to a trustee, but those powers may also be affected by state law.

Testamentary Trusts

A testamentary trust is a trust that only takes effect upon the death of its settlor (creator). The trust is typically created by inserting a provision in the settlor's will; once the settlor dies and the will takes legal effect, the trust takes effect as well. Before dying, the settlor must designate specific property (money, real estate, life insurance proceeds, etc.) to be transferred into the trust upon his death. Although the settlor can make changes to a testamentary trust at any time before his death, upon his death, the trust becomes irrevocable and cannot be changed except by the probate court.

Trustee Duties

When creating the trust, the settlor chooses both a beneficiary, who receives the benefit of the trust, and a trustee, who safeguards the trust assets. The law imposes a duty of loyalty on the trustee; he must act in the best interests of the beneficiary and not use trust property for his own benefit. To this end, he must earmark the property, keeping it completely separate from his own assets. Furthermore, although the details of this duty may vary by state, the trustee is generally required to make trust assets grow at a reasonable rate via prudent investment. The trustee may also be subject to additional duties outlined in the trust itself and imposed by state law.

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Trustee Powers

A trustee's powers are outlined in the trust document. In a typical trust arrangement, the trustee will have the power to use trust assets to pay any required taxes on the trust property, as well as the power to make distributions to the beneficiaries as described in the trust. However, in a certain type of trust, known as a discretionary trust, the trustee can use his own judgment in deciding how and when to make distributions to the beneficiaries. But all powers granted to a trustee are subject to the requirements of his duty of loyalty to the beneficiaries and state law.

Removal of Trustee

At any time, a beneficiary has the right to demand a complete accounting of the trustee's dealings with the trust. If a probate court is presented with evidence that a trustee has exceeded her powers by refusing to distribute, has dealt wrongly with the assets, or has reaped some improper benefit from the assets, the court has the option of removing the trustee from her office. If the trustee's actions have caused actual damage to the trust, the beneficiaries may seek to hold the trustee personally liable for the loss.

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Roles of a Trustee

A trustee manages property for beneficiaries according to the terms of a trust. Generally, a trustee is appointed by a person, called a grantor or settlor, who establishes and funds the trust. The settlor transfers legal title of assets to the trustee so she may manage and distribute them for named beneficiaries. A trustee's role includes responsibly and honestly handling trust assets and ensuring the purpose of the trust is carried out.

What Is a Power of Attorney for a Trust?

A trust is a legal arrangement in which a grantor allows a trustee to manage the distribution of assets to trust beneficiaries. In some cases, the trustee cannot perform his duties unless the grantor uses a power of attorney to provide the trustee with special authorization to perform certain legal acts, such as selling assets titled in the grantor's name, that otherwise only the grantor would be able to perform.

Trustee Not Paying Beneficiary

A trustee is a party who administers the assets of a trust and distributes them to beneficiaries in compliance with terms established by the trust grantor. Although the terms of a trust often allow a trustee considerable discretion with respect to the distribution of assets to beneficiaries, beneficiaries have legal options if the trustee's refusal to distribute trust assets appears to be unjustified.

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