randy
May 2, 2024

I’m a Trustee… Now What?

Table of Contents

What is a Trust?

Different Types of Trusts

Benefits of a Trust

What is my Role and Duty as a Trustee?

What are my Responsibilities as a Trustee?

What is a Trust?

A trust is a legal entity with separate and distinct rights. In a trust a party, known as the trustee, holds and manages assets on behalf of another party, known as the beneficiary. Sometimes the trustee is a beneficiary but they don’t have to be. 

Different Types of Trusts

Each Trust falls into 6 categories

Living or Testamentary Trust

Living Trust:

Created while your alive and allows you to manage your assets during your lifetime. You can change it or cancel it if it’s revocable. It helps bypass the probate process when you pass away, making the transfer of assets quicker and private.

Testamentary Trust:

Set up as part of your will and only comes into effect after you die. It can’t be used to manage assets while your alive and doesn’t avoid probate.

Funded vs Unfunded Trust

You can have a trust with nothing in it. You have to put your assets into the trust. This is the difference between a funded vs unfunded trust.

Funded Trust:

This trust has assets put into it. For example, you transfer money, real estate, or stocks into the trust while you’re alive. The trust actually holds these assets and receives the benefits of the trust.


Unfunded Trust:

This trust is set up but doesn’t hold any assets.
 

Revocable vs Irrevocable Trust

Revocable Trust:

You can change or cancel this trust while you’re alive. It flexible letting you adjust as your situation or intentions change.

Irrevocable Trust:

  • Typically irrevocable trusts can’t be changed or cancelled once they have been established.
  • A revocable trust typically becomes irrevocable upon the death of trustor, the person who creates the trust.
  • Estate tax benefits: Assets placed in an irrevocable trust are typically removed from the trustor’s taxable estate.

Benefits of a Trust

  • Avoid Probate:

    • Costly
    • Time Consuming
    • Stressful
    • Public
  • Protect assets from creditors
  • Dictate terms of inheritance for beneficiaries
  • Avoid/minimize estate taxes – typically irrevocable trusts

What is my role as a Trustee?

Fiduciary Duty: 

To act in the best interest of the beneficiaries of the trust. This means that the trustee must always act with loyalty, prudence and care when managing the trust’s assets and making decisions on behalf of the beneficiaries. 

Asset Management:

Managing the assets of the trust, including investing the assets in a manner that is consistent with the trust’s objectives and the beneficiaries best interest.

Record-Keeping: 

Keep accurate and complete records of all transactions related to the trust and provide regular accounting to the beneficiaries. 

Communication:

Communicate with the beneficiaries and keep them informed about the trust’s activities, as well as any changes to the trust’s terms or administration. 

What are my Duties as a Trustee?

Duty of Loyalty:

Act in the best interest of the beneficiaries and to avoid any conflicts of interest.

Duty of Prudence:

Manage the trust’s assets with reasonable care and diligence taking into account the risk and return objectives of the trust and the needs of the beneficiaries. 

Duty of Impartiality:

Must treat all beneficiaries fairly and impartially, regardless of their relationship to the grantor or other beneficiaries. 

Duty of Confidentiality:

Keep all information related to the trust and it’s beneficiaries confidential, except as required by law.

Duty to Follow the Trust Instrument: 

Follow the terms of the trust documents and any applicable laws and regulations when managing the trust’s assets and making decisions on behalf of the beneficiaries.  

21 Responsibilities you need to know as a Trustee

  1. Obtain a sufficient amount of Death certificates (10-20)
  2. Study Trust and follow instructions; Contact the Attorney
  3. Records of Accounts: Financial institutions, banks, Credit Unions, Retirement accounts, Investments; look for beneficiary designations
  4. Records of Debts: credit card, mortgage, auto loan, student loan, any other debt statements
  5. Copies of Insurance Policies: Life, Health, disability, long-term care, Medicare, homeowners, autos, and others
  6. Contact Social Security Office: there may be a death benefit; add to the master death list for fraud protection
  7. Credit Reporting Agencies
  8. Contact Utility companies
  9. Post Office to reroute mail to the executor or administrator of the estate
  10. Contact other governmental agencies: VA; Homeland Security if applicable
  11. Dept of Motor Vehicles: cancel driver’s license, ID, License plates, disabled placards, vehicle registrations, and ownership
  12. Contact the Employment Benefits Company
  13. Inventory List of Assets: tangible personal properties; to control assets in the home.
  14. Close all email; social media and website accounts
  15. Cancel all club and organization memberships
  16. Order Time of death appraisal if you plan on keeping the property
  17. Contact CPA/Accountant – Gather tax returns for the last 2 years, 
  18. Obtain EIN number and file estate tax returns
  19. Contact Financial Planner and Real Estate Planner-Gather all property & timeshare info
  20. Communicate, Educate, and Resolve disputes with beneficiaries
  21. Distribution of assets
Read More Blogs