What You Need to Know About Estate Trustees
You may have heard the word trustee used in a variety of contexts. For example, there’s one type of trustee whose work is confined to bankruptcy proceedings. When used in estate planning, a trustee takes on a different meaning. It may refer to an individual or organization.
Although it’s not generally good practice to define a term by using it, it is necessary to do so when explaining the role of a trustee. Quite simply, it is the person or organization that oversees a trust. There are a number of reasons why the formation of a trust is an excellent estate planning tool.
In some cases, a trust may be formed after a big lottery win. Additionally, some individuals decide to put all of their real property and other assets into a trust. In those instances, the person setting up the trust may name themselves as the trustee, with an alternate trustee in the event of incapacitation.
The individual who funds or creates the trust is known as the settlor. He or she makes the decision to name not only the trustee but also any beneficiaries.
Relatives or special friends may be appointed as trustees according to the provisions of a trust document. By the same token, a trustee could name a financial institution or law firm to follow the guidelines of the trust. Ultimately, the trust is set up for the benefit of the beneficiaries.
Trustee Duties and Responsibilities
As you might assume, a trustee is a legal representative and has a number of duties and responsibilities. In most cases, these obligations are spelled out in a formal trust document. Additionally, common law is a consideration when it comes to trustees. Trustees are further guided by the Texas Property Code, which includes the Texas Trust Code. Some of the important provision of the Texas Tax Code as they relate to trustees include:
Fiduciary Duties: Trustees assume fiduciary duties. This is considered the highest standard of care when it comes to trust and confidence. The trustee must follow the directives contained in the trust and use reasonable discretion in doing so.
Prudent Investor Obligation: Like most other states, Texas imposes a prudent investor rule on trustees. This means looking at the overall picture of the trust’s assets and managing them as a whole.
Keep an Accounting: The trustee must document all transactions within the trust and have them available for review by the beneficiaries.
Decision-Making Process: The trustee’s decisions should be made in accordance with the trust document. Additionally, the goal is to do what is best for the beneficiaries.
There are a number of other duties and responsibilities that should be reviewed with an experienced estate planning attorney. If you have been named as a trustee and need some help, you should also seek legal advice.
At the Law Offices of Manfred Sternberg and Associates, we have experience advising clients who are considering formation of a trust as an estate planning tool. Contact us to learn more about trusts and trustee appointments.