Posted by CORE PERFORMANCE

What is a Trustee: Duties and Responsibilities

What is a Trustee: Duties and Responsibilities

The grantor, which can also be called the creator, settlor, trust maker, or trustor, is the party who forms the trust. For married couples, if the trust was established jointly, they are co-grantors of such trust. The grantor can only authorize any change to the trust. 

The trustee is charged with managing assets in the trust. Many grantors prefer to be the trustee and will manage the assets for as long as they are capable. Also, married couples might be co-trustee. If any of them dies or cannot control the asset, the other party will assume the responsibility of managing the assets without any particular action. 

A successor trustee will usually come in and control the trust if the trustee cannot continue (due to death or disability). Generally, more than one trustee is named in succession in case any of them cannot function. There are times two or more adult kids will be named to act together. It could be a corporate trustee at times – a trusted company or bank in this case. 

The beneficiary is the recipient of the trust’s assets when the guarantor dies. 


What is a Trust?

A trust is any legal entity with the ability to own assets. The document resembles a will, and it includes instructions for how the grantor's final affairs will be handled and who gets the asset on death. Trusts exist in various types:

  • Testamentary: created in a will after the death of someone

  • Irrevocable: fixed and unchangeable 

  • Revocable living trust

Today's most common trust for many people is a revocable living trust, alongside a will when making plans for their estate, as it removes court interference when there is death or incapacitation. It is equally flexible because provided the grantor is alive and fit, the trust document can be amended with assets added, removed, or the entire trust canceled.  


Living Trust: How It Works

There must be an asset in a living trust for it to be functional. The title cannot be the individual name of the grantor but that of the trust. The grantor and the estate planning lawyer of the grantor need to be on the same page concerning the asset type transferred to the trust. Since the titles no longer contain the grantor's name, there is no reason for court interference in the grantor's death or incapacitation. As a result, a trustee can easily come in and take control of the grantor's financial affairs. 


Essential Things to know as a Trustee

The grantor needs to get you on board with the trust alongside the provisions. This involves knowing the location of the assets, trust documents, insurance policies (medical, disability, etc.), and other essential documents. 

However, a trustee should not be offended if the grantor does not reveal the assets' worth as most people love the privacy of their finances. It makes it essential to ensure that the necessary titles and beneficiary designations are all amended to the trust. 

One also needs to know the trustee, the successors, who they are, the sequence in which you must act, and how the actions will be - solo or with other people. 


Responsibilities of a Trustee

A trustee must never lose sight of the fact that the assets are not his. You are like a guardian of the asset for someone else – the grantor and the beneficiaries that will get them on the grantor's death. 

There are some responsibilities on you as a trustee. For instance, you are bound by all instructions available in the trust. 

  • The asset cannot be combined with your own. Investments and checking accounts must be different.

  • The trust assets cannot be used for your benefits except authorized by the trust.

  • All trust beneficiaries must be treated the same. As a result, one person cannot be favored above the other except specified in the trust.

  • The investment of the trust asset must be in a prudent manner. The risk must be minimal with moderate growth.

  • The responsibility of having a sound record, filing tax returns, and updating the beneficiaries as specified by the trust lies on you. 


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