As the Trustee of a Trust, What Responsibilities Can we Manage for You?

Being the trustee of a trust is a very important role as it serves to protect the interests of a beneficiary. The beneficiary may include an individual you are seeking to protect for various reasons. (See our list of trust indicators.)

Often, a trust is established so that the beneficiary can have use of funds that are left to them via an estate or funded during an individual’s lifetime. A trust can preserve certain government benefits that are means-tested for the beneficiary. If the terms of the trust are violated, this could jeopardize the beneficiary’s benefits.

Responsibility #1: Understand the Benefits

With respect to a special needs trust, an important responsibility of the trustee is to fully understand the benefits that the special needs beneficiary is receiving. For example, if the special needs beneficiary is receiving Supplemental Security Income (SSI) or Medicaid, there are certain restrictions on what is allowed to be received by the beneficiary.

Responsibility #2: Ensure Proper Distributions

The trustee of a trust can ensure that proper distributions are being made from the trust. The trustee would confirm that the distributions follow the terms and restrictions of the trust. The trust will contain certain language that prohibits or allows the trustee to make certain distributions.

Responsibility #3: Follow Tax Reporting Requirements

In addition to making sure that distributions are made properly, another responsibility of the trustee of a trust is to follow all tax reporting requirements. Trustees are required to file the trust income tax returns. Following these rules and guidelines are crucial because the beneficiary will be penalized should taxes not be filed properly and in a timely fashion.

Responsibility #4: Properly Invest Assets

Another responsibility of the trustee is to make sure assets are invested properly. It is the duty of the trustee to invest the trust assets in a manner that will result in the best use and growth of the trust assets. The trustee may seek to hire a qualified financial professional to make sure this is being accomplished. The trustee must also keep accurate records of any distributions made and any other transactions to or incoming/outgoing of the trust.

The duties listed above should not be taken lightly. The trustee of any trust is held to a fiduciary standard. Mismanagement of the trust may result in financial harm to the beneficiary of the trust.

We recommend that you utilize our professional guidance to ensure that your Trusts are managed properly.

Trust Indicators

  1. Child, divorce or death
  1. Child has special needs
  1. Any indicator of problems with child or child’s spouse: e.g., drugs, alcohol, gambling problems
  1. Suggestion that child or child’s spouse is spendthrift
  1. Suggestion that child or child’s spouse is a bum, lazy, won’t work
  1. Suggestion that child or child’s spouse has health problems
  1. Suggestion that child or child’s spouse has financial problems, lost job, job is in danger, prior bankruptcy.
  1. Child is remarried with stepchildren
  1. Child has significant assets going to one or more children
  1. Client has significant retirement funds
  1. Client wants to keep real estate intact for heirs
  1. Child is or may become disabled
  1. Child is young or otherwise not capable of managing funds
  1. Child has or is in a job in which the child is likely to have significant assets on his own
  1. Client has been sued
  1. Child/spouse has been sued
  1. Child/spouse has a job with a high potential for lawsuits
  1. Any indication that client dislikes child’s spouse
  1. Client wants to make sure inheritance creates no disincentive to child working
  1. Client has specific goals for kids or grandkids, e.g., going to college, working despite inheritance
  1. Client is worried someone might sue to attack the plan
  1. Client wishes to protect assets for the future generations (dynasty)
  1. Client wishes to give away assets today (crummey safe trust)
  1. Client wishes to protect a pet