The Complex Honor of Being a Trustee
There’s a well-known joke among boat owners: the two happiest days are the day you buy a boat—and the day you sell it. For many, being a trustee can feel the same. It’s an honor to be chosen, but also a relief when the responsibilities come to an end. That’s because being a trustee is a big job—one that comes with serious legal and financial duties.
What Is a Trust?
A trust is a legal arrangement where one party, known as the trustor, places assets in the care of another, the trustee, to manage on behalf of a third party, the beneficiary. Trusts are often used to protect assets, ensure smooth and intentional distribution according to the trustor’s wishes, and potentially minimize taxes and legal complications down the line.
What Does a Trustee Actually Do?
Serving as a trustee isn’t just about overseeing assets—it’s about fulfilling a wide range of responsibilities that require knowledge, diligence, and often professional guidance. Key duties include:
- Fiduciary Obligations: A trustee must always act in the best interests of the beneficiaries. This includes duties of loyalty, impartiality, care, protection of trust property, enforcing claims, and keeping beneficiaries informed. Failing to meet these standards can lead to personal liability.
- Understanding the Trust Terms: Trustees must thoroughly understand the trust document, especially how and when distributions should be made.
- Managing Investments: Trustees may be responsible for investing trust assets. This includes working with financial professionals and continually monitoring performance.
- Administrative Tasks: This involves accurate recordkeeping, accounting for income and principal, and handling paperwork and reporting requirements.
- Knowledge of Tax and Estate Planning: A trustee should be familiar with basic principles of estate, gift, and generation-skipping transfer taxes, as well as how trusts are taxed at both state and federal levels.
- Beneficiary Communication: Trustees also need to maintain open, productive communication with beneficiaries. This often includes explaining financial decisions and working through potentially sensitive distribution issues.
In Summary
Being named a trustee is a significant responsibility. It requires a solid understanding of legal and financial principles—and, often, a high level of emotional intelligence. For anyone taking on this role, it’s wise to seek guidance from legal and financial professionals to ensure the trust is administered properly and in the best interests of all involved.
These legal topics are provided to you by the President of QMC, Mark Easley. While QMC does not engage in the practice of law, Mr. Easley has practiced estate planning and elder law for over 30 years and is currently the principal at the Elder and Estate Planning Law Firm of St. Louis.