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“As you plan how you will leave your estate, it is important to your family’s future that you leave a legacy with well-executed documents. It’s also essential that you understand all of the roles of the people involved in your estate, especially the person or organization who will manage your estate.”

One of the reasons people use trusts in their estate planning is that the person named as a trustee has a legal duty to put the trust’s interests first, rather than their own interests. This is called a “fiduciary duty,” and it becomes very important when planning for the future of your assets and family. It’s an enforceable legal obligation says the article “Fiduciary Duties in Trusts and Estate Planning” from Yahoo! finance.

A trustee is the person appointed to be in charge of a trust. There are many different kinds of trusts, usually created to own assets, including money, life insurance policies and homes. The person named as trustee in the trust document makes decisions, based on the directions in the trust document, about the trust assets to benefit the beneficiary’s best interests.

Trusts created while a person is living are known, appropriately enough, as living trusts. There are people who choose to be their own trustees and manage their trusts for as long as they are able. They are both the trustees and beneficiaries of their living trusts. Married couples may be co-trustees of their trusts. The trust documents should be prepared so that, upon the death of one spouse, the surviving spouse becomes the sole trustee and manages the account.

The person creating the trust should also name a successor trustee. This is the person who will manage the trust when the original trustee or co-trustees are no longer competent to manage the trust. That might be because they have become incapacitated due to an injury or illness or because they have died.

The fiduciary duties of a non-beneficiary trustee are to act in the best interest of the beneficiaries. There are three fiduciary duties when it comes to a trust: loyalty, care and full disclosure. The non-beneficiary trustee(s) must act in the best interest of the trust and its beneficiaries. This is a high standard and why the decision of whom to name as a trustee and successor trustee is so important.

Some additional guidelines are as follows:

  • The assets a non-beneficiary trustee manages do not belong to them, and the trustee must not mix personal assets with assets in the trust.
  • A non-beneficiary trustee may not use the trust’s assets for their benefit.
  • The non-beneficiary trustee must not favor one beneficiary over the other.
  • The non-beneficiary trustee must follow the directions in the trust document.
  • The non-beneficiary trustee must keep accurate records, file tax returns and report to beneficiaries, as directed in the trust.

The terms of every trust vary, depending on the type of trust and the needs of the estate plan. The trustee needs to be familiar with the trust and its directions, so they can perform their fiduciary duties correctly.

An estate planning attorney is needed to draft trusts so they reflect the wishes of the person and their goals. Using a downloaded form or even a standard legal form is a big risk for families.

Reference: yahoo! finance (July 8, 2020) “Fiduciary Duties in Trusts and Estate Planning

For more information on asset preservation and estate planning, please visit my estate planning website.

Mr. Amoruso concentrates his practice on Elder Law, Comprehensive Estate Planning, Asset Preservation, Estate Administration and Guardianship.