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Estate Planning: What Are the Duties of a Trustee?

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Estate Planning What Are the Duties of a TrusteeMost people feel honored when asked to be a trustee over a friend or loved one’s estate. But being a trustee is more than a title. It comes with a lot of responsibility and obligation.

The general duties of a trustee vary depending on the laws of the state where the trust is situated. But to provide you with an overview, here are the duties of a trustee based on Arizona statutes, where I practice:

1. Duty to administer. The first duty of a trustee is to administer the trust in good faith and, according to its terms and purposes, in the interest of the beneficiaries, according to Arizona statutes,. This involves reviewing the trust document or trust instrument to determine how the trust is to be administered, how debts are to be paid, etc.

2. Duty of loyalty. The trustee has the duty to administer the trust solely in the interest of beneficiaries. This means the trustee should not use the trust as a source of funds for personal activities or investments (thus, no gambling or buying speculative businesses). All expenditures should be solely in the interest of the beneficiaries.

3. Duty of impartiality. If the trust has two or more beneficiaries, the trustee must act impartially when investing, managing and distributing trust property, giving due regard to the beneficiaries’ respective interests

4. Duty of prudent administration. The trustee should administer the trust in a reasonable and prudent manner. This means not making haphazard or random choices when choosing investments, managing business or managing assets.

5. Cost of administration. The trustee may only incur costs that are
reasonable in relation to the trust property. For example, it may be
reasonable to hire an attorney and spend $50,000 to fight a lawsuit if it’s for a multimillion-dollar trust. Obviously, that would not be prudent for a
$60,000 trust.

6. Duty to use special skills. If a trustee has special skills or expertise, it’s the trustee’s duty to use them to benefit of the trust. If you’re a CPA or an attorney, you’re expected to use your skills and training for the trust.

7. Delegation. As a trustee, you must delegate duties, and exercise reasonable care, skill and caution when it comes to selecting an agent. You must also establish the scope and terms of that delegation and periodically review the agent’s actions and performance.

8. Duty to control and protect trust property. It’s important to make sure assets aren’t stolen and to guard against the waste of assets.

9. Duty to keep records and identification of trust property. This is both a protection for a trust and for the trustee. Keeping good records will make it simpler when preparing taxes.

10. Duty to collect trust property. The trustee must identify the trust property so things don’t get lost and stolen.

11. Duty to inform and report. The trustee is responsible for keeping the qualified beneficiaries of the trust reasonably informed and responding to requests from beneficiaries regarding the trust.

12. Discretionary powers and tax savings. These powers provide the trustee with options in order to accommodate varying situations.

As you can see, this is a big job. But that doesn’t mean you have to do it alone. You have the right (and duty) to seek expert help to make sure things are handled properly. If you have any questions about your duties as a trustee, I’d love to help. Leave your question below or contact our office.

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