On one hand, being appointed as a trustee for a Houston trust can be something of an honor, as it shows that the grantor of the trust considered you to be a trusted person capable of carrying out the goals of the trust. However, on the other hand, it can also raise concerns, as serving as a trustee is a critical role that can, in some cases, expose a trustee to personal liability in the event they are accused of mismanaging trust assets. Thus, it is imperative that trustees not only understand their duties and how to carry them out but also that they know when they need to outsource certain roles to third-party professionals.
A Trustee’s Duties
Trustees have several duties, most of which are owed to beneficiaries of the trust. Perhaps the most important duty is a trustee’s fiduciary duty to beneficiaries of the trust. A trustee’s fiduciary duty includes the duty to administer the trust in accordance with its terms, preserve and protect the trust assets, and the duty to avoid conflicts of interest.
Administering a Trust in Accordance with Its Terms
Simply put, a trustee must perform their duties in such a way that is consistent with the terms of the trust. For example, if a trust contains an investment policy statement, trustees ensure all investment management decisions comport with the investment policy statement. Thus, even if an investment may be suitable in a trust as a general matter, if the chosen investment disregards the investment policy statement, a trustee may be found in violation of their duties.
Preserve and Protect Trust Assets
The main purpose of many trusts is centered around the preservation, protection and, in some cases, growth of trust assets. In most cases, trustees are given broad discretion in making investment decisions. However, a trustee’s fiduciary duty requires all investment decisions to comply with the Uniform Prudent Investor Act (UPIA). The UPIA generally requires trustees to consider the following when making an investment decision:
- The trust’s financial situation;
- The trust’s other investment holdings;
- Whether income generation is among the trust’s objectives;
- Tax implications;
- The trust’s investment objectives; and
- The amount of permissible risk under the terms of an investment policy statement, if applicable.
Seek Outside Help When Necessary
One of the most important skills a trustee can possess is knowing when to outsource certain trustee obligations. Trustees may find themselves in a situation that is beyond their expertise or may be too busy with their own affairs to devote the time needed to effectively manage a trust. Rather than making uninformed decisions or putting their role as a trustee on the back burner, trustees should outsource any duties they cannot address. This is important to protect both the interests of the trust beneficiaries as well as the trustee.
Trustees in Need of Advice Can Turn to McCulloch & Miller, PLLC for Assistance
If you were appointed as a trustee and have questions about your duties, reach out to the Houston estate planning attorneys at McCulloch & Miller, PLLC. At McCulloch & Miller, PPLC, we have more than 40 years of experience helping trustees understand and fulfill their duties. To learn more, and to schedule a consultation to discuss your needs with an experienced Houston trust management lawyer, call McCulloch & Miller, PLLC, at 713-903-7879 today. You can also connect with us through our secure online contact form.