You're a trustee, now what?

Being a trustee is a big job that comes with a lot of responsibilities

What would you do if a friend or loved one passed away and you learn that you've been named trustee? More often than not, a trusted friend or family member is named in the trust instrument as the successor rather than a professional.

The primary responsibility of trustees is to administer the trust in accordance with the settlor's purpose and the terms of the document, keep proper records and manage and distribute assets. Failure to act in the best interest of the trust beneficiaries can lead to personal liability. Acting as a fiduciary is an awesome responsibility that can be overwhelming to those not prepared to carry out what the role entails. Below is a brief introduction to the role and responsibilities.

Maintain trust assets

Trustees have a duty to preserve trust property, which can include investments, real estate, art, jewelry or other valuables. This may also include paying debts and expenses, having things appraised and collecting receivables. If the trust owns land, you may have an obligation to lease or manage it so that it produces income. Making investment decisions to ensure that there is a return on income when it comes to stocks, bonds or other investments is also an important part of the role. You need to care for and invest property prudently as you can be held liable for any losses resulting from your failure to do so.

Remember to keep all trust assets separate from your own. One fundamental principle is that you will not act in a way that will benefit yourself to the detriment of the beneficiaries. You are also not permitted to purchase trust property — even if you pay a fair price — unless the trust has authorized such a sale.

Use and distribute trust assets

Another responsibility is to make required and discretionary distributions to the trust beneficiaries according to the terms of the trust agreement. If you need to pay income to a beneficiary, you will need to do so at reasonable intervals. You should become familiar with each beneficiaries' needs and communicate with them regularly. If they have questions regarding the trust, it's up to you to find the answers. You should also monitor expenses associated with the trust to ensure that they're appropriate.

Manage third-party professionals

Depending on the property in the trust, professionals can help manage the assets. For instance, an accountant could prepare tax returns. Also, some trusts allow for delegating investment and management functions. You'll need to take care and caution in selecting a professional and periodically review their performance and evaluate their fees.

Oversee accounting and reporting

This is an area that's often overlooked. One fundamental duty is to keep beneficiaries informed about the administration of the trust. To do that, you need clear, accurate and detailed records of all the income that's collected, all expenses and any other transactions related to the trust. If there are co-trustees, you'll need to hold periodic meetings.

The job can be a big one but you don't have to go at it alone. If you find yourself as a recently appointed trustee, schedule a meeting with an attorney specializing in estates and trusts as well as a trusted financial advisor for advice on administering and managing trust assets. Your team at SVB Private would be happy to serve as a resource to you to discuss your options.

The views expressed in the article are those of the author and/or person interviewed and do not necessarily reflect the views of Silicon Valley Bank, a division of First-Citizens Bank and First Citizens BancShares, Inc. The materials on this website are for informational purposes only, are subject to change and do not take into account your particular investment objective, financial situation or need. Since each client’s situation is unique, you should consult your financial advisor and/or tax planning professional before acting on any information provided herein.