What it Means to be a Trustee – A Guide for Clients
The following is a guide for clients on the duties and responsibilities of a trustee. It should be of great benefit to clients in deciding whether to act as a trustee and to Fellows in advising clients on what it means to be a trustee. It was prepared by the Fiduciary Matters Subcommittee of the ACTEC Practice Committee.
While there are many types of trusts, and trusts are used to accomplish a wide variety of objectives, as exemplified in Appendix A here, the essence of a trust is a legally binding arrangement under which a person, as “grantor” appoints another person, as trustee, to hold property in a fiduciary relationship for a third person, the beneficiary.
That is the essential structure, but frequently the arrangement may be for multiple beneficiaries, and sometimes with multiple trustees, and occasionally multiple grantors. The obligations of a trustee are defined by law and by the trust instrument, which may be the Will of someone who has died, or an agreement or other lifetime document, and which spells out the uses to which the property is to be applied. Appointing someone to be trustee implies a confidence in that person and an expectation that he or she will apply the property faithfully and according to the grantor’s objectives for the benefit of the beneficiaries and not for the personal benefit of the trustee.
The administration of a trust is governed primarily by state laws, although Federal tax laws and other regulatory provisions also are part of the picture. State trust laws differ from state to state, so the discussion in this Guide will necessarily be general in nature. The required amount of court involvement in the administration, for example, can vary widely and may determine how burdensome the job of trustee can be. For a more detailed description of the duties of a trustee, you should consult your attorney who specializes in trust law.
We will begin with an overview of a trustee’s duties, some of which may be specified in the governing instrument and some of which may be explicit or implicit in applicable state and federal law. To perform those duties, trustees are given powers, and some of those as well are specified in the governing instrument while others are explicit or implicit in applicable state or federal law. Following overviews of those subjects, this Guide will offer practical and administrative points to consider when addressing what it means to be a trustee and points to think of in choosing a trustee or deciding whether to become a trustee.