I'm a Successor Trustee...What Now?

I am often asked…What exactly do trustees do after the grantors are no longer able to manage their trust? Well, to put it simply, a successor trustee manages the trust. Oh, is that all? We’re done then? I can go? Well, not exactly.

What now?

Here’s a general list of tasks for a successor trustee: (I.E. The one who manages the trust after the trustmakers or grantors are no longer able to.)

1.      Take Custody of the original documents;

2.      Provide copies of documents to the beneficiaries and relevant entities like financial institutions, etc.;

3.      Categorize and account for the debts that relate to the trust and pay the bills;

4.      Gather the assets or income streams available to the trust;

5.      Convert assets if necessary for the greatest benefit of the beneficiaries;

6.      Deal with tax issues and trust share formation and allocation;

7.      Resolve any conflicts or outstanding legal matters; and

8.      Provide assets to the beneficiaries under the terms of the trust.

The above are only the basic categories of trustee duties. There are many nuances and sub-tasks built into that framework. In many ways, running a trust is sort of like running a corporation where you have the authority to get everything done, but at the same time, you are responsible to the shareholders.

Trustworthiness is the key element of a Trustee.

A trustee must always remember that at the core of trust law lies the fiduciary responsibility that trustees hold towards the beneficiaries of the trust. This responsibility is paramount and governed by various legal frameworks that outline the duties and powers of a trustee. One of the primary obligations of a trustee under the law is to act in the best interest of the beneficiaries. This means that trustees must exercise their powers with the utmost good faith, ensuring that their actions benefit the trust's beneficiaries above any personal gains. This duty of loyalty prohibits trustees from entering into transactions that could result in potential conflicts of interest unless expressly permitted by the trust's terms, or by agreement of all the beneficiaries, or by operation of law.

Another key legal obligation is the duty to manage the trust's assets prudently. This involves investing the trust's assets in a way that balances risk with the need to generate income for the beneficiaries. Trustees are generally expected to adhere to the "prudent investor rule” (unless specifically waived by the trust), which requires them to exercise the care, skill, and caution that a prudent person would consider when making investment decisions.

Additionally, trustees are required to maintain and account for trust assets separately from their personal assets, ensuring accurate records and clear delineation. Regular accounting and reporting to beneficiaries about the trust's status and transactions are also integral components of a trustee's duties, ensuring transparency and aiding in the maintenance of trust among all parties involved.

Account for everything.

These foundational obligations are designed to protect the interests of beneficiaries and ensure the proper administration of the trust. Trustees must navigate these duties with a keen awareness of the legal expectations and the practical aspects of trust management. Failure to comply with these obligations can lead to legal consequences, including the potential for removal from the trustee position or financial liability for breaches of trust. As such, the role of a trustee is not to be taken lightly, requiring a diligent and informed approach to trust administration. In other words, it’s kind of a “thankless” job, so be certain to get help along the way.

Curry Andrews, Attorney