What Is a Trustee and What Are Their Responsibilities?

What Is a Trustee?

A trustee manages the assets and property in a trust fund for the benefit of the trust's beneficiaries. Trustees are one of three essential parties in a trust.

• A grantor establishes the trust and moves assets into it.
• Beneficiaries are the individuals or groups that benefit from the trust.
• Trustees manage the trust's property and assets on behalf of its beneficiaries. A successor trustee may take over when the current trustee dies, is incapacitated or no longer wishes to serve.

Here's how a typical trust might work. Bob and Ella establish a revocable living trust for their family. When Bob dies, Ella steps in as the successor trustee and manages the trust until her death. At that point, the next successor trustee steps up. Their oldest daughter is tasked with distributing the trust's assets to its remaining beneficiaries (herself and her siblings). When the assets have been distributed, the trust is dissolved.

Learn more >> Revocable vs. Irrevocable Trust

What Are the Responsibilities of a Trustee?

A trustee is responsible for the trust's administration and distribution of assets. Responsibilities can vary depending on the type of trust and the terms of the trust agreement, but core responsibilities may include:

• Acting as a fiduciary: As fiduciaries, trustees have a legal obligation to act in the financial best interest of the trust's beneficiaries at all times. Even when working with outside advisors, trustees are required to oversee the sound management of funds.
• Managing money carefully: Fiduciaries are required to protect and preserve the funds in their care. This means trustees may need to take extra care to ensure the trust's assets are invested safely to preserve their value. Fiduciaries may be personally liable if they do not take adequate care when making decisions on the trust's behalf.
• Keeping trust funds separate: Trustees may not commingle trust funds with their personal funds.
• Maintaining good records: True and complete records of income, expenses, investment returns, tax filings, profits and losses should be maintained at all times.
• Filing and paying taxes: Trustees are responsible for filing and paying taxes on behalf of the trust.
• Managing assets and paying bills: Trustees are often responsible for overseeing third-party advisors who offer financial or legal advice. They may manage bank accounts, collect rent on trust-owned property, pay bills and otherwise manage the operations and finances of the trust.
• Distributing assets: Trustees oversee the periodic distribution of assets as well as the final distribution of assets after a grantor's death, as instructed in trust documents.
• Communicating with beneficiaries: Trustees keep beneficiaries up to date on any changes or activity. They may answer questions about how assets are being allocated or distributed. In some cases, successor trustees may be responsible for notifying beneficiaries of the grantor's death or working with the grantor's executor on final expenses.

How to Choose a Trustee

You may choose yourself as the trustee if you're creating a revocable living trust. If you need to name a different trustee, or successor trustees, you can generally choose anyone 18 or older you think would be suitable. You can also name a third-party organization or advisor. Most trusts name multiple successors, in case anyone named is unable to serve. Here are a few common choices to consider.

• Your spouse or partner: Your spouse or partner can serve as the primary trustee or act as your co-trustee on a family trust. You and your spouse may each act as the first successor trustee to step in if the other dies.
• Your adult child or children: One or more of your adult children may act as trustees or successor trustees.
• Another family member or close friend: As an example, you might ask your sibling to serve as a successor trustee if you become incapacitated and need to pay for your own care and support using trust funds.
• A trusted third party: You can appoint a third party, such as an attorney, trust company or the trust department at a bank or credit union to act as trustee. Third-party trustees typically charge fees for their services and may require your trust to have a minimum level of assets.
• Co-trustees: Trustees don't have to serve alone. You can appoint co-trustees to manage your trust or carry out your directives. You could have all of your children act together, as long as they can collaborate effectively. Or, name both a family member and a trust company to act as co-trustees.

What happens if you can't decide? If you don't name a successor trustee, a court may appoint one if you die or are unable to manage your own trust.

What to Consider Before Becoming a Trustee

Before agreeing to serve as a trustee, consider the commitment you're making and whether you have the skills and the bandwidth to do a good job. Here are four basic considerations to think through before saying yes.

1. Understand Your Responsibilities

Read through trust documents to find out what your responsibilities are, and what help (if any) you can expect from co-trustees or professional advisors. If possible, talk with the grantor(s) in advance about their expectations and wishes.

2. Consider Your Skills

Managing a trust may call for high-level financial skills—or at least enough financial knowledge to provide effective oversight. You also need administrative skills to transfer ownership of assets, keep careful records, file taxes and communicate with beneficiaries.

3. Be Honest About Time

Administrating a trust calls for significant investment of time. If you don't think you have the time and focus, you may want to decline the role.

4. Assess Your Comfort Level

Acting as a trustee may require you to deal with difficult situations: young children who need long-term financial support after losing a parent; beneficiaries who are struggling with medical, addiction or mental health issues; siblings who don't agree with distribution terms; and more. As a trustee, you'll need to be objective and communicate, even when the news you share may be unpopular.

Learn more >> A Guide to the Different Types of Trust Funds

The Bottom Line

If you need to appoint a trustee (or multiple trustees), look for family members, friends or trusted advisors who can carry out the terms of your trust and consistently act in the best interests of your beneficiaries. If someone has asked you to serve as a trustee, think carefully about the responsibility and whether you're up for the challenge. Trustees play a pivotal role; finding the right trustee for the job can help ensure your trust is executed according to plan.