Articles Posted in Trustee

In estate planning, the term “trustee” is often tossed around, but many people do not know what a trustee actually does. In short, a trustee is a person that administers the property or assets for a third party, often for a trust fund or retirement plans and pensions. While the specific duties of a trustee depend on the trust document and what assets are held in the trust, the following describes the duties of trustees and addresses a few of the more common questions people have about a trustee’s responsibilities.

What are a Trustee’s Duties?

First off, the trustee has the responsibility to safeguard the trust assets and act in furtherance of the trust’s goals. Trusts will often have a trust agreement, which specifies how a trustee utilizes the assets in the trust and specific details regarding its management. As such, the trustee must keep accurate records, file tax returns, and report any activity to the beneficiaries, those who are to receive the assets, as required by the trust. Trustees are the decision-makers for any issues that arise regarding the trust and must make the decision based on the trust agreement and with the interests of the beneficiaries in mind.

Ensuring how a person’s assets and property will be handled after death is a critical first step when drafting a Houston estate plan. Often, a comprehensive estate plan involves the creation of one or more trusts. Thus, the second step of estate planning, determining who to name as a trustee, is often just as vital.

Serving as a trustee is time-consuming and complex. Although individuals often select a family member or close friend to serve as the trustee, picking a professional trustee can often eliminate a lot of the common issues that trustees face when executing an estate plan. Because a trustee will be responsible for ensuring an individual’s assets are distributed in a fair and legal manner, there are factors to consider when choosing a person to serve as the trustee of the estate:

Ability to Make Difficult Decisions

12.20.19Consumers often find themselves with investments with one company, insurance with another, a financial advisor with a third company and one or maybe more banks. Depending upon the asset level, it may make sense to put all of this under one roof.

Trust companies provide clients with a variety of services, so that they are all managed in one place, by one individual or one team of professionals. Trust companies manage trusts, trust funds and estates for individuals, businesses and other types of entities. They also provide investment, tax and estate planning services.

Wealth Advisor’s recent article, “Understanding How Top Trust Companies Operate,” gives us a high-level overview of the nature and function of trust companies, as well as the services they provide.

7.24.19A trust is a complex document, but taking the time to read it a few times will prove enlightening. If you have questions, call your estate planning attorney, so they can help clarify anything you don’t understand.

Attorneys do try to simplify documents when they can, so that clients will have a better understanding of what goes into their estate plans. However, according to a recent article from Forbes, “A Beginner's Guide To Reading A Trust,” there’s still enough legal language in trusts that they can sometimes be confusing. Here are some basics about trusts.

First, familiarize yourself with the terms. There are basic terms of the trust that you’ll need to know. Most of this can be found on its first page, such as the person who created the trust. He or she is frequently referred to as the donor, grantor or settlor. It is also necessary to identify the trustee, who will hold the trust assets and administer them for the benefit of the beneficiaries, and any successor trustees.

7.11.19Think of trusts like the Swiss army knives of estate planning. There are many different trusts that are used to accomplish many different tasks.

At its essence, a trust is a legal document that permits a third party, called the trustee, to hold assets on behalf of a beneficiary. The trustee has a fiduciary duty to the beneficiary, that is, the trust must put the beneficiary’s needs first. The trust document is drafted to address issues like how and when assets pass to the beneficiaries, what conditions must be met for the beneficiaries to receive assets, etc.

Because trusts usually avoid probate, the beneficiaries can get access to these assets more quickly than they might if the assets were transferred using a will. If it’s an irrevocable trust, it may not be considered part of the taxable estate, which means there will be fewer taxes due at your death.

10.23.18Most of us consider naming a friend or relative with a background in finance or law to be a trustee for our family, but there is an alternative that is important to consider.

A corporate trustee will have a very different approach to managing a trust, and depending on your situation, may be a far better choice than a family member or friend. They’ll bring sound investment management skills and knowledge, minus the distractions of emotions.

The Dallas Business Journal’s recent article, “Fiduciary investment management and corporate trustees,” explains that one of the many benefits of appointing a corporate trustee, is that they are held to a fiduciary standard of care when managing a trust investment portfolio. That means that they’re legally required to place their client’s interests above their own when making investment decisions. While this may seem like a no-brainer, it’s not the rule for all financial professionals.

10.18.17For living trusts, the person or people who set them up are usually named the initial trustees, but after that, there needs to be a successor trustee. Think carefully about who you would want to take on these responsibilities.

When the first spouse dies, the surviving spouse usually becomes the sole trustee, according to the article, “Women on Money and Mindset: Estate planning: choosing a trustee,” in The (Riverside CA) Press-Enterprise. When the second spouse dies, the trust passes to a successor trustee or trustees. Most people name an adult child, trusted friend or a family member who they trust. You can also name a bank or a professional fiduciary.

Children: Married couples often will name their oldest child as the successor trustee or they name all their children to act as co-trustees. This can work if there’s never been a divorce; there is only one child; she lives close; she doesn’t work and all the assets are investment accounts.  However, most adult children will have full-time jobs. Adding the job of trustee can be a strain because it’s time-consuming and technical. The administrative burden of taking care of your final business can be overwhelming.

Bulldog readingTrusts offer many advantages in estate planning. Privacy, avoiding probate, more control over personal finances, the ability to more closely monitor investments and tax planning are a few of the reasons to incorporate trusts into your estate plan, according to a recent article in Wilmington Business, "Selecting the Right Trustee."

Selecting the right trustee to execute your plans is just about the most critical decisions you can make—maybe even as important as the terms of the trust itself. Think about these qualifications when selecting your trustee:

Administrative Skills and Knowledge. Your trustee must perform a lot of different tasks, like safeguarding assets, collections, reinvestment and distribution of income, document interpretation, bill paying, and many others.

Trust definitionMany people set up trusts to help provide for loved ones and favorite causes after they pass away. A trust can help manage the wealth you wish to transfer and ensures the efficient distribution of assets—such as property or a sum of money—over a set period of time. Yet a trust is only as strong as the trustee overseeing it.

A trustee is the individual or company that administers a trust for the benefit of named beneficiaries. Duties can range widely and may include paying bills and taxes, and managing property and investments.

Forbes recently had a nice article about this titled “How To Choose The Right Trustee For Your Estate.” Most importantly, the article says a trustee “has a legal fiduciary duty to manage a trust on a beneficiary’s behalf,” by always acting in the beneficiary’s best interests, as outlined by the trust.

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