Estate Planning & Understanding the Role of a Trustee

By Dustin Noble | Hopkins & Huebner, P.C.| Adel Office

Trusts are a common tool used for estate planning and other purposes.  There are several different types of trusts and several different ways to create a trust.  One common factor among trusts, however, is the role of the trustee.  In general, the trustee of a trust is responsible for the management and administration of a trust.  Depending on the purpose and nature of the trust, it is common for close friends or family to be named as trustees or back-up trustees by the creator of the trust, known as the grantor.  While a trustee is typically someone the grantor has a great deal of trust and confidence in, it is important for a person serving as trustee to have a thorough understanding of the duties and responsibilities associated with serving as trustee.

Logically, a trustee must administer a trust according to the terms of the trust.  What might not be as obvious, however, is that a trustee must typically administer the trust solely in the interest of the trust beneficiaries, not the grantor.  Sometimes the grantor is also a beneficiary, so there is no conflict; however, if a grantor’s and beneficiary’s interests do not align, it is important for the trustee to understand whose interests he or she must protect.

Additionally, a trustee needs to invest and manage trust property as a prudent investor would, which commonly requires diversification of the trust’s assets.  Also, an easily overlooked duty owed by a trustee to the beneficiaries is to inform each beneficiary of his or her right to receive an annual accounting and a copy of the trust.  It is very important for a trustee to keep accurate accounting records up-to-date and readily available for beneficiaries.

Failure to fulfill these duties and responsibilities can cause, among other things, a trustee to be personally liable for damages resulting from such failure, including attorney fees.  It is worth noting that the above-mentioned duties and responsibilities are the default duties and responsibilities, but some of these duties and responsibilities can be made more or less strict according to the terms of the trust.

If you are currently serving as trustee of a trust or may serve in the future, it is important to understand your duties and responsibilities as trustee, as well as to whom those duties and responsibilities are owed.  If you have any questions regarding these issues, you should seek legal counsel.