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What Should I Know About a Trustee?

A trustee is a person or entity who’s appointed to manage assets held in trust on behalf of a third party. There are few formal restrictions on who can serve as a trustee.

What Should I Know About a Trustee?  Motley Fool’s recent article, “What Is a Trustee?” explains that a trust is a legal arrangement created to hold and manage assets on behalf of someone else, known as the beneficiary. The trustee is the person or entity responsible for managing trust assets.

Nearly anyone can be appointed as trustee for a trust, and those who establish a revocable living trust — the most common type of trust because it can be amended as long as the donor is living and able to make sound decisions — frequently appoint themselves as trustee. They will also name a successor trustee who assumes responsibility for managing trust property when the donor dies or becomes incapacitated.

A trustee becomes responsible for managing the trust assets according to the instructions in the trust document. Trustees have a fiduciary role, which means they must act in the best interests of the trust’s beneficiaries. Some common responsibilities of trustees include:

  • Understanding the instructions of the trust and the intentions of the trust creator;
  • Making required distributions, as well as those allowed at the trustee’s discretion;
  • Choosing wise investments;
  • Periodically updating beneficiaries and providing them with financial statements and tax documents;
  • Maintaining detailed and accurate records of trust assets, including income, expenses and any transactions;
  • Filing tax returns on behalf of the trust;
  • Maintaining proper insurance on trust property; and
  • Seeking outside expertise, such as an experienced estate planning attorney, when necessary.

A trustee is a fiduciary, so they’re prohibited from putting their own interests ahead of those of the trust’s beneficiaries. They must avoid conflicts of interest by keeping trust property separate from their personal property.

Reference: Motley Fool (May 2, 2023) “What Is a Trustee?”