“My brother passed away a few weeks ago. He had created three trusts, one for each of his young adult children, and named me as his successor trustee. I know a bit about investing and taxes, and I know that a trust is a legal document whereby I’m required to administer the funds on behalf of the beneficiaries, but what are my duties and responsibilities as trustee? Can someone help me navigate this new role?”*

It’s common for newly tapped trustees, many of whom have little experience in trust matters, to feel a sense of anxiety regarding the uncertainty of this new responsibility.  And rightfully so, as there are potential risks and liabilities that must be handled appropriately to protect both themselves and the trust.

The good news for new trustees? You’re not alone. Below are some initial considerations we think will help you get started.

Basic Understanding

Begin with the understanding that a trustee’s duties are to administer the trust in good faith, pursuant to the terms and purposes of the trust, and according to applicable state law.

Duty of Loyalty

The trustee must manage the trust solely in the interests of the beneficiaries and remain impartial.  This can become complicated when there are multiple beneficiaries and feuding family members.

Recordkeeping Duties

Trustees often fall short in this area. Proper recordkeeping means that:

  1. Trust assets are not commingled with the trustee’s personal assets
  2. Beneficiary requests for information are addressed promptly
  3. Trust tax returns are accurate and timely
  4. Reports to beneficiaries are provided at least annually and include a report of trust property, liabilities, receipts and disbursements — including the source and amount of the trustee’s compensation, and a listing of trust assets and their respective market values.

Investment Duties

While most state laws give a trustee broad latitude concerning investments, they also require prudent diversification in most cases. A trustee must exercise reasonable care, skill and caution when managing the trust assets, and must consider its purposes, terms and distribution requirements.

Delegation of Duties

Many states provide that a trustee may delegate his/her duties, as long as they exercises reasonable care, skill and caution in:

  1. Selecting an agent to manage the trust
  2. Establishing the scope and terms of the delegation
  3. Periodically reviewing the agent’s performance.

The above information merely scratches the surface of a trustee’s duties.  Adding an experienced advisor to your team can help you to confidently step into this new role and manage the complexities that may arise along the way.

Contact Don Laubacher to learn more about this topic.
330.255.2130 | dlaubacher@sequoia-financial.com

 

*Quote is hypothetical
This material is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product.  The opinions expressed do not necessarily reflect those of author and are subject to change without notice.  Diversification cannot assure profit or guarantee against loss. There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. Sequoia Financial Advisors, LLC makes no representations or warranties with respect to the accuracy, reliability, or utility of information obtained from third-parties. Certain assumptions may have been made by these sources in compiling such information, and changes to assumptions may have material impact on the information presented in these materials.  Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.