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.

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.

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.

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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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Trustee Duties for a Revocable Trust After Death
 

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California Irrevocable Trust Laws

An irrevocable trust is an estate-planning tool designed for the long-term management of assets, which are permanently transferred into the trust. There are several types of irrevocable trusts, but the common denominator is that the settlor – the person who creates the trust -- gives up control and ownership of his property; however, California law does provide for modification of an irrevocable trust under certain circumstances.

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.

What Happens When a Trust No Longer Has Assets?

Trusts must adhere to specific requirements to be valid. All trusts, including living trusts and irrevocable trusts, must have trust assets, i.e. property, a trustee and beneficiaries. In general, when a trust runs out of assets, the purpose of the trust is considered fulfilled and the trust may be terminated. Depending on the circumstances, the trust may need to be officially dissolved by obtaining court approval.

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