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.
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.
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.