It is good to understand the role before accepting a trustee position.
Someone you care about deeply has approached you and asked you the question.
No, it is not of proposal of marriage.
It is a request for you to serve as a trustee for his or her estate.
You are honored.
You are speechless.
How should you answer?
A recent article from The Mercury asked just that in an titled titled “Should you be a trustee?”
According to the article, first you need to understand trusts and the role of the trustee before answering yes.
The responsibilities of a trustee will vary depending on the trust.
What is a trust?
At a basic level, a trust holds assets titled in the trust now or transferred to the trust via some form of beneficiary designation later.
If the trust is a "revocable living trust" created by an individual or a married couple, then income tax returns are filed as if no trust existed using the social security number of the individual or those of the couple.
The trustee for the trust is designated when the trust is created and is commonly the same person as the trustmaker, who also is the lifetime beneficiary of the trust.
A successor trustee should also be named.
Often this successor is an adult child, a bank, or a financial institution.
What does a successor trustee do?
The successor trustee would manage trust assets as well as work with financial institutions and banks on behalf of the trustmaker/ trustee/beneficiary, if incapacitated.
If the original trustmaker/trustee/beneficiary dies, then the successor trustee would take over the responsibilities as outlined in the trust.
At the point when there is no surviving trustmaker who has reserved the right to amend or revoke the trust, it becomes "irrevocable" and is managed as a separate tax entity for the new beneficiary provided under the trust.
If a trust created as part of a last will and testament, it is known as an irrevocable "testamentary" trust.
Regardless whether created for one or more beneficiaries under a formerly revocable living trust or under a last will, how is this irrevocable trust used to administer the inheritance?
Often it serves the purpose of protecting and managing assets for a minor beneficiary.
A trustee would manage these assets on behalf of the child until the child comes of age or otherwise provided in the trust.
All trustees have a "fiduciary duty" to act in the best interest of the trust.
There is required documentation and paperwork required to keep the trustee accountable to these standards and the directions of the trust.
Often the trustee may hire other professionals to help fulfill such responsibilities.
Think investment professionals, accountants, and attorneys.
When will these responsibilities end?
The trust itself will provide for the terms of its own termination.
Often your responsibilities end when the trust has no more assets, when the beneficiaries reach a specific age, or on a certain date.
It is possible for a court to modify or terminate a trust after a court order.
Trusts vary in complexity and type.
There are special needs trusts, irrevocable income only trusts, qualified personal residence trust, non-grantor trusts, charitable trusts, "intentionally defective" grantor trusts (no, I am not joking), and many more.
Before accepting any appointment as trustee, you should consider requesting a copy of the trust and meet with the drafting estate planning attorney (or your own), so you can better understand the parameters or the trust and the role of the trustee.
Doing so will help you make a wise and informed decision.
Reference: The Mercury (July 17, 2019) “Should you be a trustee?”
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