What Are the Responsibilities of a Trustee?
Wondering what you will have to do if someone names you as trustee or what you’re really asking of the person you want to name as trustee? Understanding what the duties and responsibilities of a trustee entail can help make accepting or assigning the role of trustee less overwhelming. As estate planning experts, the Phelps LaClair team is always happy to answer your questions regarding estate plan designations.
What Is a Trust?
Creating a trust is a method of transferring ownership of certain assets. Like a will, a trust includes instructions for handling the grantor’s assets after they pass away. The grantor is the person who creates the trust, the beneficiary is the person or organization who will receive the assets in the trust, and the trustee is the person responsible for managing those assets on behalf of the beneficiaries. A trust may also name a successor trustee who will take over if the original trustee is no longer able to fulfill their duty.
Can the Grantor of a Trust Be a Trustee?
A grantor can be the trustee of a revocable trust and make changes to the trust document at any time. When a grantor who is the trustee of a revocable trust dies, the trust becomes irrevocable. The successor trustee then takes over the duties of managing the trust.
Can the Beneficiary of a Trust Be a Trustee?
Legally, a trustee can be a beneficiary of the trust, but this can create tension with other beneficiaries who may see this designation as a conflict of interest. A trustee who is not also a beneficiary does not have rights to any of the assets in the trust.
What Exactly Are the Duties and Responsibilities of a Trustee?
1: Administer the Trust
If you are named the trustee or successor trustee of a trust, you must manage the assets according to the instructions left by the grantor. Administering the trust first involves identifying and locating the assets, which may include collecting account records and property titles. You will also need to evaluate the assets and distribute them to the beneficiaries. If any of the beneficiaries are a minor, you will have to continue managing the assets they are set to receive until the minor comes of age.
2: Make Financial Decisions
Fulfilling the role of trustee requires being capable of making responsible financial decisions regarding the assets belonging to the trust. This may include deciding how to invest the assets if necessary and how beneficiaries will receive payment. Keep in mind that the trustee has a fiduciary duty to make decisions in the best interests of the beneficiaries, so you must make careful considerations when handling assets as a trustee.
3: Pay Taxes and Close Debts
Depending on the assets in the trust, you may have to pay property or income taxes as part of your duty as trustee. You will also have to file a form 1041 tax return if a trust asset produces income after the grantor’s death. You may also have to pay off debts from the trust like real estate property bills.
4: Keep an Accurate Accounting Record
Another important responsibility of the trustee is to keep an accurate record of all transactions related to the trust. The record should include tax returns, trust distributions, bank statements, and other relevant receipts. You will likely have to regularly communicate this information to the beneficiaries according to instructions in the trust.
Manage a Trust with Professional Help
Whether you’re the trustee or the grantor, managing a trust is a huge responsibility, so it’s important to consult a professional. The estate planning attorneys at Phelps LaClair in Arizona are happy to help you understand the duties and responsibilities of a trustee, estate executor, power of attorney, and other designations so that you feel confident in your choice to accept or assign these roles. Call 480-892-2488 today to schedule a consultation in Chandler, Mesa, Phoenix, Scottsdale, or Glendale.