ACTING AS A TRUSTEE

Overview of Trustee Rights, Tasks, & Standards

A trust is a vehicle for managing property, a legal arrangement through which the
trustee, either a person or institution, holds legal title to property for another person. This
person, the beneficiary, holds equitable title to the trust corpus, or assets. Being a trustee
is a major responsibility, but it also provides a wonderful opportunity to provide a great
service to the beneficiaries.
Below is a summary of the trustee’s rights while carrying out the terms of the
trust, the tasks to be shouldered, and the standards by which a trustee must act. Trustees
are held to high standards, but any trustee can succeed by putting forth reasonable efforts
and relying on the advice of other professionals.

The Trustee has the Right to:

1. Exercise trust powers. These can be express powers and inherent powers.
Express powers are written into the document, while inherent powers are not written, but
must be present to carry out the settlor’s intent.

2. Exercise personal judgment. The trustee can make judgment calls, act
accordingly, and be protected by law from beneficiaries who disagree so long as the
decision is reasonable if that is the legal standard for exercising discretion.

3. Delegate tasks. The trustee can delegate certain tasks to be performed by others,
although the responsibility of oversight and trustee duties cannot delegated. The trustee
can hire financial advisors to make investments, accountants to take care of taxes and
bookkeeping, and lawyers to give advice regarding trust interpretation. The trustee must
generally act reasonably (again, carefully ascertain what legal standard applies to the
particular trust, or required under state law) in selecting the advisors, setting out
instructions, and reviewing their actions.

4. Use trust funds to defend one’s self in litigation (maybe). While laws change
and vary from one state to another, a trustee defendant may have this option. Just in case
a suit does arise, look for this possibility.

5. Step down. When a trustee is no longer able or willing to serve, he or she may
step down and follow the trust’s instructions or state statute for appointing a new trustee.

6. Collect fees. Trustees are entitled to fees for their services. Family members often
do not accept fees depending on circumstances. Professional trustees often charge a
percentage of the funds, but may charge for their time.
The Trustee’s Tasks:
1. Review the trust's terms. Read the trust carefully to become familiar with it, and
refer back to it when questions arise. The trust’s terms must be followed, but often
decisions are left by the trust up to the trustee.

2. Make a task list. Like with all jobs, taking the time to personally make a
summary task list from reviewing the trust document, and scheduling duties on a calendar
will cement in the trustee’s mind the tasks involved. This task list can be reviewed by an
attorney who will act as an advisor along the way.

3. Make distributions. The trust will declare how much discretion the trustee has in
how much to distribute, how frequently, and what to give. Where some discretion exists,
the trustee should evaluate the beneficiary’s current needs, future needs, and other
sources of income. The trustee should also evaluate the other beneficiaries before
making a decision.

4. Taxes. Depending on whether the trust is revocable or irrevocable and whether it

is considered a "grantor" trust for tax purposes, the trustee will have to file an annual tax
return and may have to pay taxes.

5. Manage trust assets. The trustee must carefully manage trust assets by accurate
recordkeeping and proactive steps to preserve each property’s value. This ranges from
accepting new assets to properly maintaining current assets to disposing of assets.

Trustee Standards:
1. Fiduciary responsibility. The trustee acts as a fiduciary to the trust’s
beneficiaries, meaning the highest fiduciary standards apply. The trustee cannot just treat
his duties as his own personal affairs, but must attend to the trust investments and
disbursements with the same care and attention as a professional would be expected to,
although not with the same skill level.

2. Investment standards. Investments must meet the legal definition of prudence,

and investments must also balance interests of current and future beneficiaries.

This memorandum is designed to provide general educational information

regarding the issues discussed. It is not, and is not intended to be, legal advice.
Self-help is not recommended due to the serious but hidden legal pitfalls present and
financial consequences possible. Contact a competent estate planning professional
for advice.