Roles of a Trustee

By Maggie Lourdes

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.

Trustee's Fiduciary Duty

A trustee has a fiduciary duty to a trust's beneficiaries. This means he must loyally serve the beneficiaries' best interests over his own. He should avoid any act that may create a conflict of interest. For example, a trustee who is a real estate agent should act with caution regarding the listing of property in the trust since he would personally profit from its sale. A trustee should seek the consent of all beneficiaries for any act that might be perceived as a conflict of interest.

Trustees and Investments

A trustee must manage and invest trust assets carefully. This duty is often called the prudent investor rule. A trustee should not expose the trust to unnecessary risk and should take reasonable steps to protect trust property. For example, a trustee should diversify trust assets to protect them in volatile, financial markets. She should minimize the amount of transaction fees and costs for the trust and consider retaining the services of financial professionals to assist her.

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Following Trust Terms

A trustee must manage a trust in a way that achieves its purpose. For example, if a trust allocates money for a child's education, the trustee cannot reallocate it to pay for the child's wedding. A trust can grant a trustee discretion. If, for instance, it states that a trustee is to provide for a child's care, the trustee has flexibility regarding as to how he can allocate money for the child's welfare. However, he may never vary from ensuring that the trust is used to provide for the child's legitimate needs.

Keeping Beneficiaries Informed

A trustee must keep detailed accounting records regarding trust distributions, investments and assets. Generally, trustees must provide beneficiaries with a yearly accounting disclosing trust activities and holdings. Since each trust is different, however, a trustee should follow a trust's particular accounting requirements. Trustees should always work with beneficiaries to keep them reasonably informed and comfortable regarding trust business. State laws regarding beneficiary rights vary. A trustee should familiarize himself with all state statutes applicable to a beneficiary's inquiry rights.

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References

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