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What Does Being a Trustee Entail?

Imagine you have just gone through a thoughtful estate planning process.  Trusts may play a critical role in ensuring that your legacy is carried on in the way you desire. Often times, the grantor is comfortable serving as trustee while they are alive, but are looking for a trusted partner to continue the trustee duties after they’re gone. Who will you entrust with the responsibility to carry out the provisions in your trusts? Who do you know that is willing to take on this responsibility?  

The decision to establish a trust is an important aspect in one’s estate planning. It is a legal arrangement intended to ensure that a person’s assets are distributed the way they had intended. The primary reasons to establish a trust are for asset protection, carrying out a family or charitable legacy, and the continued management of the trust assets after the grantor passes away or becomes incapacitated. Once you have decided to establish a trust, choosing a Trustee, the person(s) who will be responsible for executing the provisions of the trust, is a decision that should be carefully considered.   

Trustees have a fiduciary duty to the beneficiaries of the trust and ought to have a good understanding of both the current and future needs of those beneficiaries. When choosing a trustee, the most important factors to consider are your comfort and confidence in that person, or institution, obligated to carry out the goals and objectives of the trust. To lessen the burden on an individual, you might consider pairing someone whom you know well and have confidence in, with a corporate trustee. With this dual approach, you’ll have the perspective and intimacy of a family connection and the depth of professional experience. 

If you prefer a trustee who knows and understands your beneficiary needs intimately, naming an individual such as a close family friend or relative could be a good option. However, when naming an individual, it’s important to make sure they have both the desire and financial knowledge to manage the terms of trust and the trust assets properly. Sometimes, trustees need to make difficult decisions as to whether or not a beneficiary’s request for capital should be granted or denied. 

For example, many trusts have a HEMS (Health, Education, Maintenance, Support) provision for beneficiaries to access principal. Let’s say a beneficiary requests a large amount of money to buy a new Mercedes Benz. Should the request be granted because the necessity for a vehicle falls under the HEMS provision? Or should the request be denied because this is a luxury item and more reasonable options are available? There is no simple answer here as the trust language can be interpreted in a variety of different ways, depending on who is reading it. Either way, this is a potentially awkward situation for a trustee.  

Trustees carry a level of risk that they can be held personally liable for any breach of that fiduciary duty. Seven of the major responsibilities of a trustee are listed below: 

  1. Filing Trust Tax Returns 
  2. Interpreting the terms of the trust 
  3. Distributing assets per the terms of the trust 
  4. Investing assets in a prudent manner 
  5. Acting in best interest of all beneficiaries 
  6. Keeping accurate and detailed records 
  7. Assessing beneficiary needs and assets to approve or deny distributions 

We can help- RegentAtlantic Private Trust offers a variety of different Trust solutions. We can implement a trust structure based on your desired objective. RegentAtlantic Private Trust, a Trust Representative Office of National Advisors Trust Company, is able to administer trusts located in all 50 states, including South Dakota, which is known for its favorable and progressive trust laws.  We recently hosted a webinar on trust services and you can view the replay here.

Important disclosure information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.

This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.

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