Trustee for a Trust
Trusts are a popular estate planning tool. Before you decide whether to include a trust in your Naples estate plan, it is important to have a clear understanding of the three parties involved in a trust, which include the grantor, the beneficiary, and the trustee.
The grantor is the individual who creates the trust, the beneficiary is the individual who receives benefits from the trust property, and the trustee is the individual or institution who administers the trust.
The Trustee
A trustee plays a pivotal role in managing and safeguarding assets, investments, and property on behalf of beneficiaries. Acting as a fiduciary, a trustee is bound by legal and ethical obligations to act in the best interests of the beneficiaries and to manage the entrusted resources diligently. The trustee of a trust is responsible for managing a trust and can be held accountable if they mismanage the trust. The trustee is tasked with ensuring that the grantor’s wishes are followed.
Here is a list of things the Trustee must do:
1. Work with a financial advisor to manage investments
2. Prepare annual trust accountings for the beneficiary
3. Work with the beneficiary to create a budget for monthly expenses and distribution of assets
4. Handle bill paying for beneficiaries with online banking
5. Work with the beneficiary to provide distributions for additional expenses such as college tuition, down payment on a home, purchase of a vehicle, etc.
6. Work with CPA to prepare annual income tax returns for the trust
What to Look for in Selecting the Trustee
Often the person who created the trust (the grantor) acts as the trustee until their death or incapacitation. At that point, the successor trustee takes over this role. Your trustee can be a family member or friend, trust attorney, or trust company. Each option has its pros and cons.
• Family/Friends – Choosing a reliable family member or friend ensures that your trustee will have an inner understanding of your family dynamics. However, there is the risk that your choice could cause family drama or resentment. Furthermore, being a trustee carries a lot of fiduciary responsibility. You must be sure that your family member or friend is willing and qualified to take on this significant role.
• A Trust Lawyer – A trust lawyer is a neutral party that will have the skills necessary to assume this role. If you have a long-standing relationship with your lawyer, they will also have insight into your family situation. An appointed trust attorney will need to be paid, while a family friend or family member may do this for free. Paying the Trust lawyer (or a Trust company) will reduce the assets in the trust, which in turn will ultimately reduce the amount your beneficiaries receive.
• Trust Company – A trust company is a corporate trustee that can be tied or not tied to a bank and just offers trustee services. Examples of trust companies are CoAmerica, SunTrust, JP Morgan Trust Company, and Frost Trust Company. A trust company is a good option if you predict contention between the beneficiaries. You can be assured that they will follow the instructions of your trust and safeguard the assets in the trust.
What are the Duties and Responsibilities of a Trustee in Naples?
A trustee’s specific duties depend on the unique terms of the trust agreement and the type of assets held in the trust. However, Florida law lays out general responsibilities that all trustees must follow. Some of these duties are outlined below.
• Act As a Fiduciary. The trustee has a fiduciary responsibility to the trust beneficiaries. They must administer the trust in good faith, in accordance with the terms and purpose of the trust, and in the interest of the beneficiaries.
• Act in Loyalty to the Beneficiaries. The trustee must act in the best interests of the beneficiaries. This means they can never act in a way that benefits themselves more than the beneficiaries. For example, a trustee cannot receive kickbacks for investing trust assets in certain opportunities. Additionally, the trustee cannot engage in self-dealing (i.e., taking loans from the trust or charging unreasonable fees for trustee duties).
• Be Impartial. The trustee must treat all the beneficiaries equally. This duty often arises when the trust has both income and remainder beneficiaries. The trustee must balance the interests of each category of beneficiary. For example, they cannot invest trust assets solely in aggressive growth stocks that produce little or no income for the current income beneficiaries.
• Preserve and Manage Trust Assets. The trustee must manage and invest the trust assets as a prudent investor would, considering the purpose, terms, distribution requirements, and other circumstances of the trust. It is the trustee’s job to invest assets with the intention of preserving the property now and in the future. While managing trust assets, the trustee must keep the trust property separate from their personal property.
• Communicate with Beneficiaries. The trustee should keep the beneficiaries reasonably informed of the trust administration. Communication may include things such as an overview of tax reports and account information of trust property. Additionally, they must provide the beneficiaries with an annual accounting of the trust.
Call Naples Trusts Lawyer James R. Nici
If you have questions about trusts, you should contact the Nici Law Firm. James R. Nici is an experienced Naples trusts lawyer with over 25 years of experience. He is well-versed in trusts, trust administration, setting up a trust, and selecting a trustee.
Based in Naples, Nici Law Firm offers legal guidance in Estate Planning, Estate Administration, Asset Protection, Probate services, Business Planning, Florida Domicile, and the Strategic Estate Planning System. We serve clients in towns of throughout Florida: Naples, Bonita Springs, Marco Island, Ave Maria, Immokalee, Estero, Fort Myers, Cape Coral, Sanibeland more.
Contact our office today at (239) 449-6150 or use our web form to set up a free consultation.
