A trust holds legal title to property for the benefit of another person (beneficiary). The person who creates the trust (the grantor) chooses a manager, known as the trustee, to manage the assets in order to protect them. Think of it like a box where you can hold your assets for your benefit during your lifetime, and thereafter for the benefit of another person. Sometimes the grantor becomes the trustee and names a successor trustee. So what exactly does a trustee do?
Trustee’s Duties and Responsibilities
- Act as a fiduciary, meaning they must protect the investments and distribution of the trust
- Administer the trust and follow the trust’s terms
- Be loyal to the beneficiaries and treat them fairly
- Deal impartially with beneficiaries
- If the trust dictates, a trustee should invest prudently and diversify investments with the intention of preserving them
- Keep track of records and prepare tax-related forms/filings
- Control and protect trust property
- Collect trust property
- Keep beneficiaries reasonably informed about trust business and accounting of the trust
- Keep records and don’t commingle the trust’s funds with personal funds
- Enforce and defend claims
- Make outright distributions according to the trust’s directions in a reasonable period of time
Who Can Serve as a Trustee?
When choosing a trustee for a trust, the grantor often chooses a spouse, sibling, adult child, or friend as the trustee. After all, they’ll understand the family dynamics and the grantor knows them well and trusts them. However, there’s potential they’ll have to deal with resentment from family members and if they don’t have good judgment, they could worsen family drama.
Attorney or Accountant
A grantor who has a long-standing relationship with an attorney or accountant might choose that professional as a trustee. The attorney or accountant has familiarity with the family and understands the grantor’s financial and personal goals. However, they will likely charge more than a friend or family member.
Corporate Trustees (includes Banks) or Trust Companies
Corporate trustees and trust companies can also be considered when choosing a trustee for a trust. They provide professional fiduciary services and can act independently. They’ll charge a fee for the service, but it can be worth it especially if you anticipate contention among beneficiaries. They are able to take a more stern approach with beneficiaries than possibly a family member or friend can. These entities have procedures and systems in place to manage trusts in a fair and consistent manner. A professional trustee can be useful if you have very valuable assets and a trust that’s intended to last a long time—for example, to provide for grandchildren.
A drawback to a trust company is that they may be hard to remove or become inflexible. Other issues with these large organizations might include inattentiveness, high turnover of personnel, inadequate investment management, and excessive charges. Some banks can be slow in making decisions as they need to first consult their legal departments.
Our blog “What Are the Qualities of a Good Trustee?” talks about what qualities to look for when choosing a trustee.
Choosing a trustee for a trust is a big decision. As an experienced Massachusetts trusts attorney, I can help you determine your best trustee options. Contact us today for a free consultation.