What To Do When You’re Named Trustee

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If you’ve been named as the trustee of a trust, you may have mixed emotions about it.  On one hand, you may feel special since you were thought of highly enough to have been named.  If the news came as a bit of a surprise, you may feel fearful about the responsibility (or even annoyed).  Either way, you have been named trustee of a trust. So, what exactly are you expected to do and how do you plan to carry your responsibilities out?  For starters, take a deep breath.  With a little common sense and direction, you’ll be just fine.

 

One of the first things you’ll want to do is familiarize yourself with the trust document. If you’re a sports fan, think of it as a game.  There are rules you must follow and the trust document explains all the rules. Don’t stick your head in the sand.  It’s important that you have a thorough understanding of the process and your part in it.

 

You’ll also need to create a checking account for the trust.  As the trustee, you must keep all the property in the trust safe and sound.  If the trust makes money (and it really should, if you invest funds wisely), you must track profits and make payments to the beneficiaries.  There are always expenses involved with every trust, and they must be handled promptly.  You’ll need a system for monitoring the income and expenses. A tax adviser or attorney can help you develop a system.  Some people like traditional bookkeeping methods with a paper trail from checking and investment account statements, while others prefer accounting software like Quicken or QuickBooks.

 

Whichever route you choose, you must report out to the beneficiaries and anyone else named in the trust on an annual basis, so it’s critical that all income and expenses go through the trust checking account.  You’re what’s known as a “fiduciary”.  Wikipedia states that “A fiduciary duty[1] is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the “principal“): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents.”  Bottom line, you must keep the beneficiaries interests in mind at all time.

 

That said, it’s important to use common sense around the trust.  Never borrow or lend money from the trust to anyone – for any reason – and don’t look for the latest get rich scheme to invest in.  Be prudent.  Invest wisely.  Treat the money like it’s your own.  If you’re like most people, you’re probably not in the best position to diversify the trust portfolio among stocks and fixed income securities without some guidance and direction. It’s a good idea to leave sound financial advice to the pros.  If you stay in touch with the beneficiaries on a regular basis, you’ll better understand their needs and you can make every effort to meet them.  For example, if the beneficiaries receive any public benefits, make sure you don’t do anything to jeopardize their eligibility.  Speaking of being prudent, don’t forget to file annual income tax returns for the trust.

 

As always, you don’t have to go it alone.  Parrish Law is here to help, and your first consultation is always free.  If you need some professional advice to make sure you are fulfilling your role as trustee properly, call on us at (408) 741-3500.

 

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