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Estate Planning, Probate and Business Law Blog by Valente Law, LLC

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Trustee Checklist – Trustee’s Duties & Powers

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Trustee's Duties checklist outline for Cleveland, Ohio and Akron, Ohio trust attorney

One of the most common questions we get from new clients who have been named as a Trustee of a Trust, is “what exactly do I need to do to stay in compliance with the terms of the Trust?  Is there a checklist?”  Well, now there is!

For the benefit of our Trustee clients, to answer the question of “what do Trustees need to do?” we have compiled the following checklist and outline for the Trustee to follow:

The Trustee has the following general Mandatory Duties:

  1. Duty to Obey Terms of Trust;
    1. READ THE TRUST!
    2. Pay attention to any requirements regarding Trust Protectors or Trust Advisers and comply
    3. Pay attention to distribution provisions:
      1. Required Distributions of Income
      2. Discretionary Distributions of Income and Principal
        1. What standard? Health, Education, Maintenance and Support?
      3. Required Distributions of Income and Principal
      4. Specific Distributions of personal property or cash
  2. Duty of Prudent Administration:
    1. Act in Good Faith
    2. Act in best interest of all Beneficiaries
    3. Consider purpose, terms and distribution terms
    4. Invest trust assets as if your own
    5. Consider:
      1. Needs of Beneficiary
      2. Other income of Beneficiaries
      3. Preservation of Trust assets
      4. Diversification of Trust Assets
      5. Modifying the terms of an ambiguous or unworkable trust, rather than terminate the trust
      6. Foreseeable threats to trust assets or beneficiaries
    6. Protect the Trust Assets:
      1. Inventory all assets immediately upon appointment
      2. Take custody of assets
      3. Change locks on house
      4. Secure jewelry and valuables
      5. Maintain insurance
      6. Appraise property before selling if value is uncertain
      7. Update title to real estate and other assets to reflect your trusteeship
      8. Notify all banks, financial institutions, etc.,
    7. Pay Taxes
      1. Income taxes
      2. Property Taxes
      3. Gift Taxes
      4. Estate Taxes
    8. Pay Debt Obligations
  3. Duty of Loyalty;
    1. Avoid Conflicts of Interest and Self Dealing
    2. Take only a reasonable fee for serving as Trustee
    3. Beneficiaries can reverse self dealing transactions by Trustees
    4. Exception to prohibition to Self Dealing:
      1. If authorized by trust
      2. If approved by Court
      3. If beneficiary consented or ratified
      4. If beneficiary didn’t commence action within time limit
      5. If transaction occurred before trusteeship
    5. Do not perpetuate misconception that Trustee is adviser of Beneficiary
      1. Trustee has own rights and obligations, and should not advise beneficiary if there are competing rights or obligations
  4. Duty of Impartiality;
    1. Duty of impartiality applies to:
      1. All beneficiaries
      2. All investments
      3. Management
      4. Distributions
      5. Weighing competing interests of beneficiaries
      6. Consistency in Exercise of Discretion
  5. Duty to Keep Records and Report:
    1. Keep beneficiaries reasonably informed of material information to protect their interest
    2. Must provide beneficiaries with:
      1. Copy of Trust
      2. Reasonably requested information
      3. Change of Trustees and contact info
      4. Annual Accountings
    3. Must keep personal assets and trust assets SEPARATE
    4. Keep all financial records/bank statements
    5. Account for ALL Trust Property
      1. Prepare accounting identifying all trust assets at least once annually
      2. Prepare accounting identifying all trust debts at least once annually
      3. Log all expenses of the Trust
      4. Log all fees you take for serving as Trustee
      5. Prepare final accounting, zeroing out the trust funds
        1. All Assets at beginning of trusteeship
        2. All Income
        3. All expenses and fees
        4. All final assets
        5. All distributions to beneficiaries leaving a $0.00 balance
    6. Communicate with Beneficiaries
      1. Provide notice immediately upon appointment
      2. Be consistent
      3. Document everything
      4. Be reasonable
      5. Must give notice if/when:
        1. Mandatory requirement in trust
        2. Accepting Trustee Appointment
        3. If Trust becomes irrevocable
        4. Notice of Withdrawal Right
        5. Notice of Distribution Right
        6. Responding to Reasonable Demands for Information
      6. Give reasonable notice before resignation
  6. Disclosure

Additional Best Practices for Trustees:

  1. Due Diligence regarding Beneficiaries:
    1. Employment status
    2. Income level and sources of income
    3. Cost of Living
    4. Educational Status, cost of tuition
    5. Housing costs
    6. Healthcare needs
    7. Drugs, Alcohol, Gambling, etc.
    8. Financial Statements or Tax Returns
  2. Always presume your decisions will be questioned:
    1. Maintain documentation to support your decisions
    2. Get beneficiaries’ consent whenever possible
    3. Get third parties support in advance of action in dicey situations
    4. Get Court approval in extreme situations
    5. Get signatures for receiving and waiving right to contest accountings
    6. Keep all records:
      1. Mail
      2. Bills
      3. Check registries
      4. Bank Statements
      5. Collection letters
      6. Tax documents
      7. Insurance policies
      8. Correspondence with beneficiaries

If allowed in the Trust, the Trustee may:

  1. Delegate Authority to CPA, Attorney, Financial Adviser, Property Manager, etc.
    1. Can pay professional fees from trust fund
    2. Can pay all other costs of trust administration from trust funds
  2. Appoint co-trustee
    1. Both Trustees are jointly and severally liable
    2. Commonly a family liaison
    3. Commonly an individual along with a Corporate Trustee
    4. Co-trustees must agree in majority decisions
  3. Terminate the Trust:
    1. If the Trust value has gotten too small
    2. If purpose is no longer necessary
    3. If trust is ambiguous or unworkable
    4. Trust has a set time period to terminate
    5. Trustmaker revoked Trust
    6. Follow terms of Trust, and if silent follow Trust Code
    7. If Court authorizes or requires it

 

Simple, right? …I didn’t think so.  Call Valente Law today, to help you stay on track!  If you are looking for more information on Trusts and Estate Planning, then check out our Main Page on Trusts and Estate Planning. We have the systems in place to make your trusteeship go smoothly and avoid any potential disputes with beneficiaries.  We are offering free initial consultations to all new trustee clients, so call us today at (330) 665-5000 and let’s get started!

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Comments 1

  • Eric Valente

    February 26, 2017 2:03 pm · Reply

    The checklist is constantly evolving based on updates to trust law and new case law precedents from the courts. Stay informed!

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