Trusts come in many forms and are created for a wide variety of reasons. Regardless of what type of trust you create, or for what reason you create the trust, the trust must have a trustee. Along with deciding how to fund your trust, you must decide who to appoint as the trustee of the trust. Deciding who to appoint as trustee may be the most important part of the trust formation process given the responsibilities and duties associated with being a trustee.
Sometimes, in an inter-vivo trust, the trustor, or grantor, of the trust is also the trustee. “Inter-vivo” simply means that the trust is created and becomes active while you, as the grantor, are still alive. A trust which does not take effect until your death is referred to as a “testamentary” trust. Even if you appoint yourself to be the trustee in an inter-vivo trust, you may appoint a successor trustee to serve in the event of your death. Understanding the role of a trustee will help you to decide who to appoint as your trustee.
A trustee has a duty of loyalty and impartiality to all the beneficiaries of the trust. Among other things, this means the trustee must keep all beneficiaries informed of trust business as well as treat all beneficiaries equally. A trustee must honor and adhere to the terms of the trust regardless of any personal opinions the trustee may have regarding the terms.
The trustee is also responsible for preserving, protecting and investing the trust assets. A trustee must report to all beneficiaries on a regular basis and account for the trust assets. Trust assets are also often invested in order to grow the trust. The trustee must invest the assets prudently and make all reasonable attempts to produce income from the investments.
A tax return must also be filed each year for the trust as well as expenses paid that are incurred by the trust. Income that the trust earns each year is also frequently distributed to the beneficiaries by the trustee. Finally, the principle assets of the trust must be distributed to the beneficiaries according to the terms of the trust, or when ordered by a court.