Expectations of a Fiduciary
How must a fiduciary carry out this role?
The trustee should administer the trust with the reasonable care, skill, and caution that a prudent person would under the current circumstances to accomplish the purposes of the trust as determined from the trust wording
Can a trustee delegate responsibilities?
Generally, the trustee should not delegate responsibilities that the trustee can reasonably be expected to perform. However, it is not uncommon for trustees to delegate certain tasks that are related to investment, tax, legal and accounting matters. The trustee must prudently select which agents to use, and must oversee those agents.
Duty to provide accountings
In some circumstances the trustee will have a duty to provide trust accounting and other information to the beneficiaries.
The trustee is required to keep the beneficiaries reasonably informed about the trust and its administration.
However, there are important exceptions.
- Upon reasonable request by a beneficiary, the trustee must provide a report of the information relating to the assets, liabilities, receipts, and disbursements of the trust, the acts of the trustee, and the particular terms of the trust that are relevant to the beneficiary's interest.
- Probate Court usually requires the trustee to provide an accounting at least annually, at termination of the trust, and upon a change of trustee to each beneficiary to whom current distribution of income or principal is authorized. However, the accounting or information might not be required if waived by the terms of the trust or the beneficiary, or the trust in question is revocable.
The trustee must maintain proper accounts. Accountings can be complicated, so it is extremely important to maintain proper accounting and backup documentation.
A jurisdictional probate court may also require the trustee to provide specific notices and information to the beneficiaries when a portion of a revocable trust becomes irrevocable, or there is a change of trustee of an irrevocable trust. You should consult with us about these notices.
A trustee has a duty of confidentiality. The trustee has a general duty, but not in all circumstances, not to disclose to a third person information about the trust and the beneficiaries. However, the trustee might need to disclose certain information to properly administer the trust.
Avoiding conflicts of interest
Executors, trustees, and agents under a power of attorney must fulfill their roles faithfully and fairly to all concerned. A trustee must not put his or her interests above those of the trust or the beneficiaries, and should avoid conflicts of interest with the trust and the beneficiaries. This can be a difficult area because it is absolutely permissible and common for a trustee also to be one of several beneficiaries.
Conflicts of interest between a fiduciary's obligation to impartially administer the funds under their stewardship and their own self-interest oftentimes arise. If a dispute arises, the fiduciary needs to know how to respond and what is and is not permitted to avoid a conflict and must always avoid conflicts of interest.
In addition, a fiduciary who acts under the circumstances of the moment, must also be careful to protect themselves from "Monday quarterbacking" from an unjustified disgruntled beneficiary. We can guide a fiduciary through potentially troublesome waters.
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Tips for Executors: 7 Steps to the Probate Process
Special Needs Planning: Choosing a Trustee with a Network