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Expectations for Trustees

Posted on: March 30th, 2016
Individuals named as trustee are often selected by the trust grantor (creator) because they are responsible and reliable. Trustees hold defined, and sometimes limited, powers of trust administration. In some cases, the trustee is aware that they may be called upon to serve in the role, while in other instances an individual is informed they are a trustee after the grantor’s incapacitation or death. 
Close friends and family members who are considering accepting the role of trustee or who find themselves unexpectedly serving as successor trustee should review a few of the many legal obligations tied to the role:
  • Reinvestment and distribution. Trust administration involves many activities, some of which involve managing, investing, and reinvesting trust assets as well as properly distributing trust assets. In some situations, trustees might seek the guidance of a trust attorney or advisor to ensure beneficiary distributions are accurately made. Trustees may be held personally liable for conflicts that develop as a result of improper reinvestments or distributions.
  • Accounting records. In many instances, accountings or trust reports must be prepared by trustees and sent to trust beneficiaries or local probate courts. Reports provide formal records of distributions, trust maintenance fees, investments, adjustments, and other accountings.
  • Tax law and filing deadlines. State and federal laws affect final individual income, fiduciary income, estate, and other tax matters. The trustee must observe tax law requirements, applicable legislation changes, and filing deadlines. Just as with other matters noted above, the trustee may be liable for expenses and loss associated with inadequate trust management, which could include failing to file, failing to pay, or underpaying taxes.

A trustee removal process can be initiated in the event a trustee abuses their powers or neglects their duties. This process could be lengthy and involve court time unless a trust protector has been named in trust documents with the power to remove trustees. Trust protectors are becoming increasingly popular and allow another party to oversee the actions of a trustee, remove trustees, adjust situs and governing law, amend beneficiaries, and more.

For individuals who are looking for a resource while navigating their role as trustee, our asset protection attorneys offer a Trustee Manual. The manual is tailored toward successor trustees of living trusts. Request a copy of the manual here or 919.493.6351.

By Attorney Samantha Reichle

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