Southwest Florida

What If You’re Asked to Be a Trustee

Trustees may be responsible for many different types of trusts
Trustees are “fiduciaries,” which means they are held to a high legal standard and must act in the trust beneficiary’s best interest – not their own.

Being asked to be a Trustee is a question that deserves serious consideration. Because there are so many different types of Trusts and Trustees, the answers to the question posed above will vary greatly, says The Mercury in a recent article that asks “Should you be a trustee?”

At the very simplest level is a revocable living trust. The person who creates the Trust during his lifetime is called the Grantor, The Grantor appoints a Trustee when the trust is established. The Grantor may name himself – or someone else – as the Trustee of the Trust. The Grantor’s assets are retitled in the name of the trust and are now possessed by the Trustee. The Grantor continues to file the same income tax returns, using his Social Security number, and the income from the Trust assets are treated as his income.

In this instance, the Trustee duties are pretty easy. Instead of wearing your “Mr. Jones” hat, you are just wearing your “Mr. Jones, Trustee of the John Jones Trust” hat.

In most cases, the Trust document names at least one successor Trustee. Those persons are typically adult children, although it could also be a lawyer, accountant, or a financial institution. If the Grantor becomes disabled or incapacitated, the successor Trustee is responsible for managing the Trust assets – dealing with banks, financial institutions and others on behalf of the Grantor.

After the Grantor dies, the successor Trustee would continue in that role, and details of their responsibilities should be outlined clearly in the Trust document.

Another type of Trust is called a testamentary Trust. It’s generally a very simple Trust that’s created pursuant to a Will. It’s often created to provide support for a minor beneficiary who might inherit assets. Usually parents or the surviving parent of a minor beneficiary or the executor of the Will is named as the Trustee for the child’s funds until the child reaches a certain age.

All Trustees, regardless of what type of Trust is involved, have a fiduciary responsibility, meaning that they are held to a high legal standard of accountability and must always put the needs of the Trust before their own. The Trustee is required to maintain accurate documents and cannot take funds for their own use. A Trustee can be paid a reasonable fee, unless the Trust documents have other directions.

In most cases, the Trust document gives the Trustee the right to hire other people, such as attorneys, accountants, or financial advisors, to help fulfill their responsibilities. Sometimes those responsibilities may be as simple as setting up a bank account, but other times it may be much more complicated.

When do you stop being a Trustee? It is usually when the Trust document says the Trust is to end, which might be at a certain date, or when the beneficiaries reach a certain age, or when the Trust fund is empty. Or it may be when a Court terminates the Trust.

For more complicated Trusts, the Trustee may need the help of an estate planning attorney, also known as a Trusts and Estates attorney. One complicated type of Trust is called a Special Needs Trusts (SNT). An SNT is created for an individual with special needs who receives help from needs-based government programs like Supplemental Security Income (SSI) or Medicaid. There are different kinds of SNTs, depending on the needs of the individual and their family.

Other more complicated Trusts include: irrevocable income only Trusts, intentionally defective grantor Trusts, non-grantor Trusts, qualified personal residence Trusts and many, many others.

So, before you accept the responsibility of being a Trustee, make sure you have some understanding of what you’re agreeing to do.

Reference: The Mercury (July 17, 2019) “Should you be a trustee?”

Other articles you may find interesting:

Estate Plan Like George Washington

Naming a Trust as the Beneficiary of an IRA

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