How Does a Trustee Serve Beneficiaries?

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A trustee is responsible for trust administration.

Trusts are useful estate planning tools for those who want to retain greater control over assets or maintain the privacy of their affairs.

Several factors impact whether a trust will be effective.

An experienced estate planning attorney creating the documents is critical to a healthy foundation.

The trustmaker must fund the trust for it to govern these assets.

Trustees must also be competent and trustworthy to manage their responsibilities.

According to a recent Motley Fool article titled “What Is a Trustee?, beneficiaries depend on the trustees to manage assets on their behalf.

A trustee must manage numerous demands.
A trustee must be organized when managing a trust.

Although a trust is a legal entity for holding assets on behalf of one or more people, the trustee is the person or entity tasked with managing the trust assets.

Who is eligible to serve as a trustee?

This depends on the type of trust.

With a revocable living trust, the individual who created the trust and almost anyone else can serve as a trustee.

Because a revocable living trust may be amended, it is common for the person who created the trust to serve as the trustee and name successor trustees to manage the asset if the trustmaker becomes incapacitated or dies.

For irrevocable trusts, the maker of the trust surrenders assets to the trust permanently and cannot be the property manager.

Those who serve as trustees are considered fiduciaries.

What does this mean?

A trustee must make decisions in the best interests of the trust beneficiaries.

In this role, people cannot place their own interests over those of the trust’s beneficiaries.

This means avoiding conflicts of interest and keeping their own property separate from the trust.

What are the typical responsibilities of trustees?

A trustee must understand the intentions of the trustmaker and the trust instructions.

The trustee also must make required and discretionary distributions to beneficiaries.

This person or entity should choose investments wisely to steward these funds best.

The trustee must keep detailed and accurate records of income, expenses, and transactions and provide periodic updates to beneficiaries regarding tax documents and financial statements.

This person must file tax returns for the trust and maintain insurance on property held in the trust.

Trustees may even benefit from consulting with an experienced estate planning attorney for their expertise.

Because this role carries significant responsibilities, thoughtful care must be taken when naming a trustee.

Reference: Motley Fool (May 2, 2023) “What Is a Trustee?

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