A trustee is a person who holds legal title to property for the benefit of another. If you have been appointed the trustee of a trust, the trust maker recognized you are trustworthy and have good judgment. As trustee, you are responsible for following the terms of the trust in a timely and proper manner. You should be able to do most of this yourself, but an attorney can give you valuable guidance and assistance.
Trustee in an Executor Role
Today, many people use revocable living trusts essentially as a will substitute. The trust’s main purpose is to transfer the maker’s assets to their beneficiaries without the court’s involvement. In such cases, a trustee performs many of the same duties as an executor/administrator, but does not have to report everything to the court. The trustee’s job is more short term (e.g., typically 6 months to 1 year).
Here are some of the basic steps that many trustees must perform in this role:
- Review the trust document to determine what happens to the trust assets, and identify the beneficiaries.
- Notify the beneficiaries of the trust.
Gather a list of the decedent’s assets. Determine the value of those assets on the date of death to establish the new tax basis for future appreciation purposes.- Confirm that all the assets are either titled in the name of the trust or the trust is named as a beneficiary. If an asset is not properly titled, you may have to file the will in probate court to transfer that asset into the trust.
- Pay the decedent’s outstanding debts and bills, including the costs for funeral and burial.
- Obtain certified copies of the death certificate.
- Obtain a tax identification number for the trust
- Contact the banks, brokerage firms, life insurance companies, etc. to notify them of the decedent’s death. Complete the necessary forms to transfer the assets into the name of the trust with the new tax identification number.
- Prepare an accounting for the beneficiaries, showing the list of all assets on the date of death, the expenses paid, the net trust assets, and the beneficiary’s distribution.
- File a trust tax return, if necessary.
Trustee Managing Assets for a Beneficiary
Sometimes a trustee is named to manage trust assets for a beneficiary for a long-term or indefinite basis. This is common, for example, when parents appoint a trustee to manage their minor children’s inheritance until they are more mature (i.e., age 25, 30, 35). This is also common in second marriages when the decedent wants to support the surviving spouse while ensuring that any remaining assets transfer to the decedent’s children.
If you are a trustee of this type of trust, your trustee “job” lasts longer.
In general, in addition to some of the above duties, such a trustee has the following duties:
- Distributions to Beneficiaries - You must follow the trust in terms as to when and how to make distributions to the beneficiary. Some trustees have complete and unfettered discretion to make or not make distributions. Other trustees have little to no discretion. For instance, they are mandated to distribute the trust assets as soon as the beneficiary reaches a certain age; or they are mandated to distribute a fixed percentage to the beneficiary on an annual basis.
- Investment Standards - You must invest the trust assets in a prudent matter. Most trustees will hire a financial advisor to invest the trust assets.
- Keep Trust Assets Separate – You must keep the trust assets in separate accounts from your own
- Accountings - You generally must provide the beneficiaries with an accounting of all income, distributions from, and expenditures by the trust, on an annual basis. In addition, if the trust was created in a last will and testament (i.e., a testamentary trust), you must make accountings for the probate court.
- Tax Returns – You will have to file a trust tax return each year.
