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Something has happened. Your dinnerware set finally matches, you’ve graduated from box wine to bottles, you’re making your own dentist appointments and, despite your best efforts, you have started to channel your mother. You have become an adult. Just when you think you’ve got adulting down, you learn that someone has named you as trustee of their trust. Gulp. Among everyone they know, they think YOU are responsible enough to make sure their money or property does what it’s supposed to do if they can’t be in control. Before regretting every responsible decision you’ve made, remember that it’s an honor to be chosen as trustee. It’s also a moral and legal responsibility, so, here are some tips to make sure you are up for the task.
Ask When? In most cases, your responsibility as trustee won’t start today, but rather at some future time as a backup. The most common type of trust is a revocable living trust which controls how an individual or couple’s property is used for their lifetimes and how it’s passed to loved ones after they die – cue you as the “successor trustee.” Your role is to take over the control and disposition of property if the trust creators die or become incapacitated. If the trust is an irrevocable trust instead, your responsibilities as trustee may start immediately or again at a later time as a successor trustee.
Ask Why? You’re likely being asked to manage and distribute assets to your friend or family member if something happens to them and to distribute property to care for their children or other loved ones. If the trust is irrevocable, it more likely has a specific purpose for its creation, such as providing for education or benefits to someone with special needs. It’s not asking too much to want to know generally who the trust benefits and the primary purpose of the trust. If you’re being asked to serve immediately, this is clearly an area where you should feel free to ask any questions.
Ask What? As trustee, it’s important to know what assets the trust controls.Odds are, if the trust is a living trust, it controls your friend/family member’s home, investments and life insurance, but it could also own an interest in a business or rental real estate. Trust assets change over time, so if you’re a successor (future) trustee, you might just ask if there’s anything you should know about what property the trust holds now. If you’re being asked to serve as trustee immediately, you’ll definitely need to know exactly what the trust will own since you will be legally responsible to manage those assets.
Ask Where? If you’re a successor trustee, you should minimally know where to get a copy of the trust, should something happen to the current acting trustee. If you’re being asked to serve immediately, you’ll need a copy of the trust now, as the trust document is your written instruction on how to manage and distribute assets to beneficiaries.
Grab Your Sticky Notes. There will be a lot of legalese in the trust, but there is also clear language, so get out your sticky notes and dig in. You can and should ask the estate attorney to explain anything you don’t understand. You should also take some time to read articles or a book about what it means to be a trustee and consider reading our piece, So You’ve Been Named as Trustee.
Get Serious and Seek Help. As a trustee you are held to a fiduciary standard of care. That means you’ll need to put the beneficiaries’ needs above your own, treat beneficiaries fairly, protect and invest the trust assets prudently, and keep records and file tax returns. The trust will likely allow you to use assets to pay for professional help. Most trustees work with an accountant, estate attorney and an investment advisor.
Know Your Options. You don’t have to be a lawyer or a financial wizard to be a trustee, and your friend or family wouldn’t have named you as trustee if they didn’t think you were up to the task. It is a big responsibility, though, so if you aren’t comfortable, you can decline the position. If you are comfortable but worry that your sentiment may change as life changes, know that you can later decline to serve or resign in the future.