The Five Rules to Follow to be the Perfect Trustee

Posted by John Crow | Mar 22, 2020 | 0 Comments

If someone you love died tomorrow, would you know what to do with their bank accounts and their properties? If you have been appointed as a trustee of a living trust, this needs to be a question that you can readily answer. In the same way, if you are considering who to appoint as a trustee of your trust, you need to make sure that they know what to do at the time of your death.

When you're appointed as a trustee of a living trust, it's your responsibility to manage the trust accounts and properties after the death of the person who created the trust dies. The death of a loved one often brings instability and conflict as the family grieves and tries to figure out life without the person they lost. It's the trustee's responsibility to take charge of the legal and financial realms to ensure that accounts and properties are managed appropriately. It's important to be a competent, knowledgeable, trustee because you are handling someone else's inheritance. The trustee is responsible for managing estate assets wisely until the assets can be distributed to the beneficiaries.

The rules below explain what is most important for a trustee to know for them to be successful in their role. If you are appointed as a trustee, read through the five rules below and take them to heart. You have a big responsibility on your hands!

If you are not a trustee but you have an established trust with named successor trustee, review this post and consider how well your successor trustee fits the mold. If you have even an inkling of hesitancy regarding your trustee fulfilling the duties below, it might be time to reconsider who will be managing your trust after you die. By the time your trustee is handling the steps below, you won't be there to monitor his or her efficiency. Read each step and ask yourself whether you believe the person you appointed as a trustee is competent for the role. If you are unsure, discuss with your trustee what their duties will be after your death so that they understand what will be expected of them. You can also contact an attorney at any time to appoint a new trustee or add a co-trustee.

The Five Rules:

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Rule 1: Find a team of experts to assist you.

It's risky business handling someone else's money without the help of experienced professionals. Legal jargon can be complex or vague, and you don't want to misinterpret the terms of a trust. Make an appointment with a local estate planning or probate attorney who can help you with the process. An estate attorney can guide you through your duties of closing out a living trust.

In addition to an estate attorney, you will also want to consult a financial planner or an accountant. An accountant can help you with records, receipts, tax issues, and business files. A financial planner can give financial advice for managing investment and business accounts. Even if you feel comfortable handling finances and investments, it's a good idea to check in with professionals who can double check your financial decisions.

Rule 2: Manage trust assets carefully and decisively.

Imagine trying to juggle your financial accounts, properties, investments, businesses, and taxes all at the same time. Now imagine doing all of this for another person while still taking care of your personal life. That's what it is like being a trustee. You are in charge of maintaining the condition of the deceased's estate. This includes:

  • property upkeep
  • filing tax returns
  • filing claims on life insurance, and
  • handling investments

The beneficiaries of the trust depend on you to make the best decisions possible to take care of their inheritance.

Your team of experts can provide professional advice and assist you with managing financial accounts, but financial and property decisions are still your responsibility. The trustee has the ultimate say on how accounts and properties are managed to protect the corporate of the trust. Professionals can help along the way, but if trust funds are managed inappropriately or incompetently, the consequences still fall on the trustee.

Rule 3: Avoid using the trust as your personal piggy bank.

“Avoid” sounds precautionary, but misusing trust funds for your own benefit is a serious issue. The assets of a trust are reserved solely for the beneficiaries. If a trustee dips into the trust assets for his own use and enjoyment, he is stealing the beneficiaries' inheritance. A trustee might try to justify using money offering various excuses. Many of these excuses may seem logical, but the trustee cannot use the assets or income for his or her benefit. The only exception to this rule is when the trust allows for compensation or compensation is approved by Court.  

 Rule 4: Request compensation for your time.

Obviously, a trustee cannot pay himself by withdrawing funds from trust accounts; however, it is possible to be compensated for role as a trustee. Closing out a trust can be a time-consuming process. The time and energy required to manage and distribute assets of a trust can take away from the trustee's general life activities and expenses. Sometimes a trust specifically states an amount of compensation the trustee can receive for his or her responsibilities. If the trust does not say anything, the court can rule that the trustees be compensated for their trustee responsibilities. Read more about trustee compensation here.

Rule Five: Distribute trust assets in a timely manner.

Generally, a trustee can expect to complete trustee responsibilities within a year. Legal battles and conflict among the beneficiaries can greatly extend the time frame, but these instances are usually rare. The trustee manages the decedent's accounts, oversees property upkeep, and protects the assets in the trust until the trust is terminated. As soon as the beneficiaries receive their inheritance, the trust is terminated and the trustee is relieved of his or her duties.

One of the worst things a trustee can do is slack on his responsibilities and delay the distribution of the beneficiaries' inheritance. If the beneficiaries feel that the trustee is not managing their inheritance appropriately, they can take legal action against the trustee. The trustee's priority should be to distribute trust assets as quickly and smoothly so that the beneficiaries receive their inheritance as soon as possible.

Contact Us

You can read more about how living trusts work and the role of the trustee on our website. If you have more questions about trustees, or the estate planning process, call our office today so we can help you get answers for what you need!

About the Author

John Crow

John Crow is the founder of Crow Estate Planning and Probate, PLC, a boutique law firm located in Clarksville, Tennessee. He has extensive experience in guiding people through the important and often complex decisions surrounding wills, trusts, conservatorships, and business formations.

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