Responsibilities of a Living Trust Executor

By David Carnes

The executor of a living trust, normally referred to as the trustee, holds legal title to all trust assets but is expected to administer these assets for the benefit of the trust beneficiaries rather than himself. Some of his responsibilities are set by state law, and others are set by the terms of the trust deed.

Duty of Care

The trustee must manage trust assets with a reasonable degree of care. Although the term "reasonable" is somewhat ambiguous because it is based on the particular facts of each case, in general it means that the trustee must manage trust assets with as much care as a prudent person would exercise when managing his own assets. If he is authorized to invest trust assets, for example, he may violate this duty by engaging in reckless high-risk trading. The duty of care is a legal fiduciary duty-- it applies even if it is not mentioned in the deed of trust.

Duty of Loyalty

The duty of loyalty is another legal fiduciary duty that applies to the trustee independently of the terms of the deed of trust. The trustee must act in the best interests of the beneficiaries. He may not benefit from his administration of the trust, except for any trust administration fees authorized by the trust deed. A trustee violates the duty of loyalty if he reaps economic benefits from his administration of the trust, even if these benefits do not harm the beneficiaries.

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Trust Administration

The trustee must administer the trust in strict accordance with the terms of the deed of trust. A deed of trust may grant the trustee broad or narrow authority, and the trustee must act within these limits -- he must distribute assets to beneficiaries on time, for example, and he may not invest trust assets unless he is authorized to do so by the deed of trust. The terms of the deed of trust define the trustee's authority even if the grantor later changes his mind, until the trust is either amended or revoked.

Duty Not to Delegate Authority

Although the trustee may assign certain trust administration tasks to other parties such as accountants and lawyers, he remains ultimately responsible for their performance. If, for example, the trustee hires an incompetent tax lawyer to file trust tax returns, the beneficiaries may hold the trustee financially responsible for the lawyer's malpractice. Nevertheless, the trustee may still seek compensatory damages from the lawyer to reimburse himself for any damages he paid to beneficiaries.

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Responsibilities of a Trustee to a Beneficiary in Maryland

References

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Fiduciary Responsibility in Family Trusts

Family trusts, also referred to as revocable or living trusts, are popular estate planning tools because they avoid probate court proceedings. A trustee bears a fiduciary duty to carry out the stated purposes of a trust for the benefit of its beneficiaries. A family trust may state very specific purposes, such as paying for a named grandchild's medical degree at a specific university. A family trust may also state broad purposes, such as distributing all assets equally to beneficiaries when the trust's maker dies. A fiduciary relationship is based on a high degree of loyalty. Each state has its own laws governing the creation and administration of trusts. However, all states recognize general fiduciary duties of loyalty, care and prudence. Most state trust laws reflect the principles embodied in the Uniform Trust Code. Therefore, although state law nuances exist, certain trust principles are common nationwide.

Can I Change a Successor Trustee Without a Lawyer?

A successor trustee of a trust is the party appointed to replace the trustee named in the original trust deed. There are a number of ways to replace a successor trustee and none of them absolutely require that you retain a lawyer. Keep in mind that state laws vary somewhat on the process of replacing a successor trustee.

Rights of the Beneficiary of a Family Trust

A family trust is a trust in which the beneficiaries are family relations of the grantor. Since the assets of a revocable trust legally belong to the grantor, beneficiaries have no rights in trust assets that are not subordinate to the grantor's right to unilaterally revoke the trust. The assets of an irrevocable trust, by contrast, legally belong to the beneficiaries subject to the trustee's fiduciary authority. Trust beneficiaries enjoy certain rights under state law.

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