Trusts can be an excellent method for protecting assets, avoiding probate, and ensuring family members are cared for in the future, but these estate planning tools only work if they are properly funded and assigned a responsible trustee. The person who made a trust, known as a settlor, will look for a trustee they can rely on who shares similar overall values and thoughts on money management.
Duties Required of a Trustee in New York
Being asked to serve as a trustee should be seen as an endorsement of your character. It means the settlor thinks highly of your trustworthiness and ability to handle financial matters. Accepting the position of trustee isn’t a duty to undertake lightly, however.
Trustees will often need the assistance of an attorney with experience in estate planning to gain an understanding of their various legal responsibilities. What specific actions you need to undertake as the trustee can vary depending on the type of trust that was made and the specific instructions set down by the settlor. A credit shelter trust designed to help high-income spouses will work differently than a living trust meant to build and protect assets for someone’s grandchildren, for instance.
In the case of a revocable living trust, you have a “fiduciary” responsibility to the settlor while they are still alive, and then eventually to the beneficiaries named in the trust after that person passes away. This fiduciary role simply means you need to maintain the trust in a financially responsible way that doesn’t result in your own personal gain while also following the settlor’s wishes.
In general, the various responsibilities of trustee can include:
- Cataloging and appraising. You should take a full inventory of everything placed in the trust, as well as determine the exact value of those assets. Being a trustee includes extensive record-keeping, and every financial move made with the trust’s assets must be documented.
- Disbursing assets. The purpose of a trust is to provide assets to the beneficiaries at some point, but you may have to decide how much is given and to whom. Unfortunately, this can result in a difficult position for you if the beneficiaries have different ideas about how much they should receive and how often. A trustee needs to be a neutral party focused on following the instructions written down by the settlor. In the case of a revocable living trust, disbursing assets may not be necessary until after the settlor passes away.
- Keeping trust assets separate. It is critical to ensure non-trust assets are never mixed with the trust, particularly when it comes to your own personal accounts and property.
- Managing. Overseeing a trust can include selling assets or investing them for future growth so beneficiaries continue to have funds available down the line. These management duties may include hiring financial advisors for investment help and attorneys for legal interpretation of the trust’s instructions.
- Paying taxes. Depending on the type of trust and the size of the assets, you may need to file an annual tax return for the trust, which might mean working with an accountant.
Obviously, these responsibilities as trustee can require a significant expenditure of your time and effort. In some cases, you can take a reasonable fee for your services overseeing the trust.
Regardless of the type of trust or whether it allows you to recoup a fee, all of these duties have to be handled while following the wishes of the settlor. If you don’t act within the confines of the written directives or in the best interests of the trust you can be removed as trustee, or even face serious legal consequences.
Talk to a Skilled Attorney If You’ve Been Named Trustee
To help the settlor’s family and protect yourself, always consult a skilled estate planning attorney so you fully understand your rights and your obligations. Have you been appointed a trustee and aren’t sure what to do next? Get in touch with Alatsas Law Firm today.