Whether a trust is included in your estate plan, or you’ve been asked to administer a trust, it’s important to understand the duties of a trustee. Permitting someone to manage considerable sums of money, property or other assets is a serious undertaking.
Before you select a trustee or agree to become one, make sure you speak to an attorney to better understand the specific obligations of a trustee. This is especially important if the trust involves unusual or complex assets.
What is a trustee?
Assets such a money, cars or property can placed into a trust. Upon a person’s death, the trust is managed by a pre-designated person, in accordance with the specific directives of the deceased. The trust is managed on behalf of the beneficiaries. For example, if a trust is established for a grandchild, it may stipulate that the grandchild can only receive 25% of the principal at age 25, 25% at age 30 and the balance at age 40. The designated trustee will ensure that the directives of the trust are followed.
A trustee, therefore, has a fiduciary duty to the beneficiary of the trust. This means they made a commitment to act in the beneficiary’s best interests. Trustees cannot take money from the trust to purchase a new Corvette for themselves, or unilaterally decide that the beneficiary doesn’t “deserve” to get a stipulated payment.
Duties of a trustee
While there are many duties a trustee may need to perform, the following are the most important:
Ohio Revised Code Section 5808.1 describes trustee duties as “Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries….”
5808.13 adds, “A trustee shall keep the current beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. Unless unreasonable under the circumstances, a trustee shall promptly respond to a beneficiary’s request for information related to the administration of the trust [emphasis added].”
Trustees are also required to keep “adequate records of administration” and keep the trust property separate from their own property.
In short, trustees are expected to keep records, avoid self-dealing and above all, look out for the interests of the beneficiaries. This includes informing beneficiaries of their rights, and the actions taken to manage the trust.
If you plan to set up a trust, or have been asked to act as a trustee, call Bart Leonardi, a highly experienced Ohio estate planning attorney, today.