Your comprehensive estate plan should include much more than just your Last Will and Testament. For many people, a living trust is also part of their estate plan, due in large part to the numerous and varied goals that can be reached using a living trust. If you have decided to include a trust in your estate plan, you will need to decide who to appoint as the Trustee of your living trust. Do not make the mistake many people make of failing to take the time necessary to choose the right Trustee because choosing the right Trustee can make your trust a success whereas choosing the wrong Trustee can lead to the failure of your trust. One reason people fail to appoint the right person for the position of Trustee is that they don’t understand the duties and responsibilities that go along with the position. The job of a Trustee requires a significant amount of legal and financial acumen, which is why you may want to consider a professional Trustee for your living trust.
How Does a Living Trust Work?
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a “Settlor”, also referred to as a “Maker” who transfers property to a Trustee. The trustee holds that property for the beneficiaries of the trust. The Trustee must abode b the terms of the trust, which are created by the Settlor, unless those terms are illegal or unconscionable, the Settlor changes them (if applicable), or a court changes the terms.
What Is a Living Trust?
Trusts are broadly divided into two categories – testamentary and living trusts. A Testamentary trust is one that does not take effect until the death of the Settlor (creator) of the trust whereas a living trust, as the name implies, takes effect during the lifetime of the Settlor. Living trusts are then further divided into revocable and irrevocable living trusts with the former being able to be modified or revoked by the Settlor and latter not being able to be modified or revoked by the Settlor.
What Are the Duties and Responsibilities of a Trustee?
The duties and responsibilities of a Trustee are much greater than most people realize, often including:
- Fiduciary duty – a Trustee has a fiduciary duty to all beneficiaries, both present and future, of the trust. A fiduciary duty means the Trustee must use even more care than he/she would with his own assets and investments.
- Duty to follow investment standards – a Trustee must follow the “prudent investor” standard. This requires the Trustee not to invest in risky or speculative investments and to always consider what is in the best interest of current and future beneficiaries of the trust.
- Responsibility to communicate with beneficiaries – the Trustee of a trust has a responsibility to communicate with all trust beneficiaries regarding trust business.
- Responsible to follow trust terms – a Trustee must understand, and abide by, the terms of a trust unless they are illegal or unconscionable.
- Responsible for distributing assets – the trust terms will dictate when, to whom, and how much, assets are to be distributed from the trust by the Trustee. A Trustee may have discretion to make distributions.
- Duty to prepare and pay taxes – a trust is a separate legal entity. As such, the trust must file and pay any state and/or federal taxes due. It is the Trustee’s duty to see that they are filed and paid.
- Duty to keep records of trust business – a Trustee must keep detailed records of all trust business, including accounting records.
Why a Professional Trustee is Often a Better Choice
Given the knowledge, abilities, and experience it takes to successfully administer even a relatively simple trust, not to mention the time commitment, it often makes sense to appoint a professional Trustee instead of simply naming a spouse or other family member as the Trustee of your living trust. Despite the name, the issue is not whether you can trust the person you name as Trustee butt whether that individual has the skill set needed to successfully manage and administer the trust.
If you have additional questions or concerns about trusts, or appointing a Trustee for a trust, contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.