Serving as a Trustee: What You Should Know
Trusts can be a highly effective way to preserve wealth in an estate plan, protecting assets from a lengthy and expensive probate process and giving an added level of privacy. Due to these factors, revocable and irrevocable trusts have become popular options in estate planning, especially with high-net-worth individuals. However, the efficacy of a trust often depends on the quality of the trustees.
A trustee is generally in charge of managing the trust and ensuring that the grantor’s wishes are carried out, acting as a manager and advisor of the trust. As the trust is its own legal entity, these funds are now legally separate from the grantor but still working according to their desires and plans. A trustee is in charge of managing this fund and ensuring its success.
For more information on trusts and trustees, consider speaking with an experienced Florida estate planning attorney from Loughlin Law, P.A. Schedule a consultation by calling the office at (561) 677-8384.
What Are Trustees?
A trustee is an entity that is effectively the caretaker and administrator of a trust. When an individual, called a grantor, creates a trust, they must nominate another person or legal entity to manage and oversee the interests of the trust. One trust may have one trustee, several trustees, or a trustee who is not an individual, such as a bank or another legal entity. Trustees will manage, invest, and hold assets in the trust per the trust’s purpose and guiding documents.
Who Can Serve as a Trustee in Florida?
A trustee in Florida must be at least eighteen years old and of sound mind. As the trustee will be expected to understand and execute their fiduciary duties, the state does not allow minors to be named as trustees. In addition, trustees are not allowed to be the sole beneficiaries of a trust, as they are expected to work in the interest of the grantor and not personal enrichment.
Legal Expectations of Trustees
While trustees are expected to execute their fiduciary duties and fulfill the intent of the trust, there are also several legal responsibilities and expectations on a trustee. There are many laws surrounding the use and regulation of trusts, as well as outlining the responsibilities of a trustee. Trusts are generally created with a purpose to benefit the intentions of the beneficiaries, and the trustee is obligated to serve those interests within the confines of the trust.
Impartiality
According to the Florida Trust Code Section 736.0803, trustees are required to give equal consideration to the interests of every beneficiary. This means that a trustee is legally forbidden from playing favorites in the distribution of assets and furthering the interests of beneficiaries. They must act with the same degree of care to protect the interests of each beneficiary, which prevents misappropriation of funds and unethical management.
Loyalty
In addition, the trustee must be loyal to the beneficiaries of the trust. They must oversee the assets entrusted to the trust fund in a way that is solely for the benefit of the beneficiaries. This is one of the reasons that a trustee may not be the primary beneficiary of the trust, as that would present a conflict of interests. Trustees are also prohibited from self-dealing or investing trust funds in a way that would enrich themselves without thought to the benefit of the beneficiaries. Transactions from a trustee that are found to be conflicts of interest may be considered void.
For more information on the legal expectations of a trustee, consider speaking with an experienced estate planning lawyer from Loughlin Law, P.A.
Duties and Responsibilities of Trustees
While there are several legal responsibilities that a trustee is accountable to, this does not fully encompass the expectations for those serving as trustees. Depending on the structure of the trust and the specific purpose of its creation, there may be many other duties and expectations of a trustee. These expectations may vary depending on whether it is an irrevocable trust or a revocable trust.
Document Management and Accounting
While trustees are carrying out their fiduciary responsibilities, investing and managing assets, they are also expected to keep clear documentation of their actions. Receipts and proof of expenditures are all key to ensuring that the trust is functioning properly. Trustees are also in charge of accounting income and expenses, as there are often significant funds going in and out of the trust.
Asset Distribution and Management
Trusts often have an assortment of assets invested in them, varying from cash to real estate and more. Some trustees may be expected to manage these assets and assure their value, depending on the terms of the trust. In addition, when the grantor dies, a trustee will also be in charge of distributing these assets to beneficiaries as indicated by the documentation provided at the creation of the trust. Trustees can generally function in a similar capacity to an executor of a will, although a trust is not necessarily tied to the death of the grantor.
Trustee Meetings
Some trusts are managed by multiple trustees or by corporations, which may entail meetings and discussions to determine the choices made regarding the trust. Serving as a trustee may entail contributing to these meetings and ensuring all parties are on the same page. Trustees may also be expected to answer questions regarding the trust to beneficiaries.
Taxes
Depending on the type of trust, some trustees may be expected to pay taxes on the assets within the trust. There are several ways this can be accomplished, including the trustee filing it themselves, hiring a CPA, or others. In any case, the trustee is generally held responsible for ensuring this is carried out.
Frequently Asked Questions
Listed below are some of the commonly asked questions regarding serving as a trustee.
Is There a Financial Risk in Being a Trustee?
If trustees mismanage funds, they may be subject to repercussions from the beneficiaries. This could take the form of removal as a trustee, or even a surcharge action to seek compensation from the trustee.
What Should I Do If a Trustee Has Breached Their Duty?
If a trustee has breached their duty and failed to seek the best interests of the beneficiaries, you may be entitled to compensation. An estate planning attorney may be able to help clarify the situation.
Contact a Florida Estate Planning and Probate Attorney Today
Serving as a trustee in an effective and responsible capacity can help the trust flourish and improve the lives of the beneficiaries by protecting wealth and leaving a lasting legacy. By ensuring that trustees comply with regulations and Florida laws regarding trusts, a grantor can rest easy knowing that their funds are well cared for. For more information on trusts and trustees, consider speaking with an experienced estate planning attorney from Loughlin Law, P.A. Schedule a consultation today by calling the office at (561) 677-8384.
