We previously explored a common practice in estate planning in which the grantor (the individual who created the trust) leaves assets to beneficiaries in trust as opposed to outright. The Trustee of the trust is tasked with distributing the assets when (1) set conditions are met or (2) with discretion when the standards set by the grantor are met.
Once the determined assets will be left in trust, the next decision is, who should serve in the role of Trustee? To make this decision, one must first understand the role and the obligations bestowed upon the Trustee.
The primary duties of the Trustee are:
- To observe the Trust terms;
- To act impartially;
- To avoid conflicts of interest;
- To keep accurate records; and
- To invest prudently.
Simply put, a Trustee is charged with putting the beneficiary’s best interest in the forefront of each decision made – such as how to invest the assets and when to make a distribution – and to keep the beneficiary informed of the status of the trust administration. A Trustee is held to the highest level of care; therefore, the trustee must take the role seriously. The Trustee is entitled to compensation for service in the role.
An individual or a corporate entity can be a Trustee. While there are some exceptions, in most cases the beneficiary can serve as the Trustee of the trust for his or her own benefit. If there is a creditor concern, however, that is not advisable for several reasons. In a complex situation or one where there is a trust for the benefit of multiple beneficiaries who may not always agree, a corporate fiduciary can provide value in the role of trustee as they are impartial, professionals.
