I Have Been Named As Trustee: What Do I Do?
When creating a Trust, one must designate a Trustee to manage the assets of the estate. One individual, several individuals, family, friends, professional advisors, an institution, and others can be designated as Trustees. Being designated as a Trustee brings many responsibilities that must be performed. The experienced trust and probate attorneys at Lee Kiefer & Park, LLC, can assist a Trustee in executing these duties.
Lee, Kiefer, & Park, LLC, is a team of probate and estate lawyers. The firm is located in Las Vegas and provides legal services throughout Nevada. The attorneys are knowledgeable and reputable. Managing partner Kennedy E. Lee and partner Matthew W. Park have been listed as preeminent lawyers by the widely respected Martindale-Hubbell lawyer rating service. Each of the founding partners has been selected as Super Lawyers and Legal Elite. The attorneys received their degrees from well-respected law schools.
Trustees have every power an individual would typically have over their own property. However, these powers can be limited in the provisions of the Trust document. An attorney can help with the following.
MANAGE TRUST PROPERTY
Trust property includes liquid assets as well as real estate. An example of liquid assets are stock holdings. Trustees have a responsibility to make sure property is maintained, increases in value, is insured, and current on any taxes or dues owed. If a company is an asset of a Trust, the Trustee has a responsibility to ensure that the company is run judiciously.
MAINTAIN FINANCIAL BOOKS
Trustees must collect income that comes from the Trust property. The source of this income includes stocks and physical property. A Trustee pays all expenses associated with the Trust and making sure enough cash is on hand to make the distributions that are required to comply with the Trust document. Trustees can enlist the help of an accountant or lawyer to help accomplish these duties.
DUTY TO INFORM BENEFICIARIES
A Trustee has a duty to keep the beneficiaries informed of the status of the Trust. This is typically done with an annual report, a combination of an income statement and a balance sheet. The report includes the opening balance, a list of assets owned by the Trust, a list of Trust liabilities, a list of Trust income for the year, a list of expenses paid by the Trust during the year, a list of any property that was distributed during the year, and the closing balance. Other beneficiaries should be aware of should be included as well, for example, a suit against the Trust.
A Trustee must pay all applicable taxes for the Trust every year. These taxes include ordinary income and capital gain income. Tax forms must also be completed for each beneficiary that has received property or income from the Trust. These documents are generated by the Trust and sent out on its behalf. Beneficiaries pay the tax on distributed items.
COMPLY WITH TERMS OF TRUST
If a Trustee has a question about what should be done, the first place to look is the Trust document itself. The most important thing is to strive to comply with the intent of the individual who created the Trust.
ADMINISTER TRUST FOR BENEFIT OF BENEFICIARIES
A Trust is set up to benefit the beneficiaries, not the Trustee. Any action the Trustee takes must be from a selfless position. If a Trustee is thinking of what they can gain, they are in the wrong.
TREAT BENEFICIARIES IMPARTIALLY
The Trustee must look to the terms of the Trust in all areas. If each of the beneficiaries is dealt with equally in the Trust document, Trustees cannot give different treatment to one beneficiary that will harm another beneficiary.
KEEP BENEFICIARIES INFORMED
It is good practice to give each beneficiary a copy of the Trust. As stated previously, dissemination of information is often accomplished with an annual report. It is also a good idea to give beneficiaries notice when the Trustee takes any action that affects the Trust.
Trustees have a duty to satisfy claims against the Trust, keep appropriate records, incur reasonable costs, and defend the Trust.
SEGREGATE TRUST PROPERTY
A Trustee must keep their own property separate from the property of the Trust. Trust funds and personal funds cannot be mingled.
LOYALTY TO THE TRUST
Trustees must have the best interest of the Trust in mind when making any decision or carrying out any action. This does not prevent the Trustee from charging fees or being compensated. Trustees should not buy trust property, sell property to the Trust, or borrow or lend money without permission from the Trust document. Any profit gained by the Trustee from these actions likely would go to the Trust. Trustees need to avoid any conflict of interest.
If a Co-Trustee is violating one of these duties, Trustees have a responsibility to act to stop it. Trustees can be held personally liable for the bad acts of another Trustee.
REMOVAL OF TRUSTEE
A Trustee can be removed by the Court in response to the breach of an administrative or fiduciary duty.
A surcharge is an award of money by the court to beneficiaries for damages. The Trustee is personally liable for these funds.
The Court can order the Trustee to stop acting. The Trustee can also be forced to act and comply with their duties.
VOID ACTS/REDUCE COMPENSATION/AWARD FEES
The Court has the power to void any act by the Trustee that breaches a fiduciary duty and reduce any fees due to the Trustee for the time that the duty was breached. If a breach is sufficiently egregious, the Court can order legal fees be paid personally by the Trustee. This is rare, but within the Court’s discretion.
If you find yourself as a Trustee and feel overwhelmed by the complexity of your duties, contact Lee Kiefer & Park, LLC, for a free consultation, either by using the online form or by calling 702-333-1711.