So someone, in his or her estate plan, has asked you to be their trustee. What does this mean? What are the responsibilities of a trustee?
A large part of the word “Trustee” is TRUST. If someone trusted you enough to choose you as the trustee of his or her property, it’s quite an honor. It’s also a big responsibility. What does a trustee do?
Maybe this is the first time you’ve ever been asked to administer a trust and you’re not sure what’s involved. If it’s a simple trust, your job could be finished in about six months, once the trust assets have been distributed to the beneficiaries. If it’s a more complex trust, you could have ongoing responsibilities lasting years.
How prepared are you to take on the duties of a trustee?
The first question many people have is, what’s the difference between a trustee and an executor? According to the American Bar Association:
- An executor is responsible for settling an estate according to the terms of the will.
- A trustee holds legal title to property for the benefit of another (the beneficiary) and acts according to the terms of the trust.
- A beneficiary is a person who is to receive property from the estate or the trust.
You could be the executor and the trustee. Both an executor and a trustee have “fiduciary” responsibility. A fiduciary is someone who manages assets for the benefit of another.
Let’s take a look at the duties of an executor and trustee separately.
Duties of the Executor
- Represents the estate for legal purposes
- Inventories and appraises estate assets
- Pays outstanding debts
- Obtains copies of the death certificate
- Notifies Social Security
- Notifies the VA if applicable
- Notifies beneficiaries
- Pays taxes
- Distributes assets to beneficiaries
Duties of the Trustee
- Takes control of the trust:
- What are the terms of the trust?
- Who are the beneficiaries?
- Are the trust accounts accurate and up-to-date?
- Invests the trust assets
- Tracks receipts and disbursements
- Distributes assets to beneficiaries according to the trust terms
- Makes discretionary decisions regarding distributions
- Prepares records, statements and tax returns
- Communicates with beneficiaries, answers questions and addresses concerns
Work with a team
That’s a lot to manage, especially if you’re doing both jobs. You may have the skills to go it alone, but if you don’t, the best way to steer clear of potential pitfalls is to work with a strong team of professionals– a Connecticut estate planning attorney, a tax advisor and a financial planner. The key to success is staying organized. These professionals will help you set up the right system from the start so you can gain control and keep control.
Once you learn exactly what a trustee does, and with the right guidance, you will be well equipped to assume the role. And to carry out the wishes of the person who placed so much faith in you.
Estate Administration: 6 Steps Required by an Executor
Financial Responsibilities of a Fiduciary
Should You Choose Family or a Professional Trustee? Know the Pros and Cons