What You Need to Know About Being a Trustee

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So, you have been chosen as a Successor Trustee to manage your relative’s or friend’s Trust. Wow, you may think, what an honor. Yes, being chosen as a Successor Trustee is certainly an honor; the person who chose you likely considered you trustworthy, responsible, amicable, and detail-oriented. Before serving as a Successor Trustee, however, it is important to understand what a Trust is, what purposes it serves, and what serving as a Trustee entails.

 

Understand the Purpose of a Trust

 

A trust is a written agreement wherein one person, or multiple people, agree to transfer property to another person or people (the Trustee(s)), who then manage the property, or assets, for the gain of another person or people (the beneficiary/ies).  One of the most common types of trust created is a living or revocable trust, established to avoid probate court proceedings upon the death of the person creating the Trust.

 

Most commonly, the person creating the trust (also known as the “Settlor”), is also the first Trustee and the beneficiary during his or her lifetime. It isn’t until the Settlor dies or becomes unable to manage trust assets (such as during illness or cognitive decline), that the Successor Trustee steps up to the plate to manage and distribute assets to heirs.

 

Understand the Details of the Job

 

As a Trustee, you will manage trust assets and distribute them in accordance with the directions of the trust document. Your actual day-to-day responsibilities will vary depending on the type of trust you are managing, and any specific directions in the trust itself. Regardless of the type of trust you manage, you must be prepared to cope with specific challenges. You’ll need to be honest, responsible, and communicative with the trust beneficiaries.

 

You should be prepared for possible disagreements among the beneficiaries, as well, and be prepared to justify any decisions that are made with regards to asset distribution. As a Trustee, you are in position of legal liability towards the beneficiaries and must act in their best interest at all times.  Furthermore, you will need to know when to end the trust (by heeding the details of the trust document).

 

Know This May be a Longtime Commitment

 

While most Trustees’ work distributing assets takes about six months, there are instances where the job term stretches much longer. If you are expected to administer an ongoing trust (such as for children or young adults), there will be more work involved. The good news, however, is that the bigger tasks (paying off any remaining debts, filing necessary paperwork, and inventorying trust assets) will have been completed within the first several months.

 

There Could be Risks

 

Most people accept the job of Successor Trustee out of loyalty to the deceased. Loyalty aside, sometimes the best decision can be to say no. A Trustee’s job is incredibly involved, nuanced, and can come with risks. One of the biggest risks is with the beneficiaries themselves. If you have a strained relationship with the beneficiaries from the start, for example, you may not have the easiest time working with them in a productive manner.

 

Another risk comes with the identification of assets. Sometimes there is a huge amount of investigative work required by the Trustee to identify the deceased’s assets. This requires a sizeable chunk of time, resources, and energy that not everyone has! Litigation is a whole other form of risk, that is not uncommon. Creditor lawsuits may already be in progress, and as Trustee you’re expected to defend the trust against any lawsuits. Though trust funds can be used to pay for any legal expenses, this is still time-intensive.

 

 

Nobody should impulsively accept the job of Successor Trustee. It’s important to take the time to review the trust and know the beneficiaries, as well as your own schedule and existing responsibilities. If you ultimately decide the job is not for you, you’ll be required to formally resign in writing. Notifying the beneficiaries in writing is also a wise move to ensure no future confusion.

 

If you do accept the job, remember the huge responsibility that comes with it. Your loved one believed you to be the best person to handle his or her affairs. Like any other job, it is best to maintain utmost professionalism throughout the process.

 

 

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