Understanding Trustee Types and Responsibilities

Understanding Trustee Types and Responsibilities

Every trust needs a trustee. But what is a trustee, what are the different trustee types and
what are their responsibilities?

This article will define what a trustee is, explore the two main types of trustees and outline
their responsibilities.

What Is a Trustee?

A trustee is a person or organization that manages a trust.

They have a fiduciary responsibility to handle the trust in the best interests of the trust beneficiaries. Although the grantor (the person who created the trust) usually names the trustee, the role can be given to another organization or person if that’s found to be in the beneficiaries’ best interest.

Whoever is the trustee must manage the trust according to the requirements laid out in the trust document.

The Two Trustee Types

You may hear a lot of terms thrown around: independent trustee, successor trustee, co-trustee, administrative trustee and corporate trustee. But the two most common trustee types are individual and corporate trustee.

1. Individual Trustee

An individual trustee is a person appointed by the grantor to manage their trust. It may be a family member or friend or possibly the family lawyer or CPA. The grantor usually picks an individual trustee because of the person’s familiarity with the family. While this may seem a positive attribute, it can also be negative as it can often lead to family discourse due to the individuals’ lack of understanding of the duties a trustee must perform. Not having a third party to help with family issues is another downside to appointing an individual trustee.

2. Corporate Trustee

Corporate trustees are businesses or organizations that manage trusts. Grantors will choose corporate trustees for their professionalism and unbiased approach to trust administration.

Independent Trust Company: A Corporate Trustee You Can Rely On

Families across the country depend on Independent Trust Company for professional trust management with a personal touch. We take our fiduciary duties as an administrative trustee seriously and communicate regularly with beneficiaries to ensure everyone understands the trust’s purpose. Contact us today for the trust administration your family deserves.

The Trustee’s Responsibilities

Regardless of who is trustee, their responsibilities are the same. The trustee must dedicate much time and effort to fulfilling their duties. Whether an individual or corporate trustee, they’ll need to develop a solid trustee-beneficiary relationship. Both trustee types must have
a good understanding of and be able to execute duties in many areas, including:

Sometimes merging an irrevocable trust with another trust or going through a process called decanting can provide additional benefit, clarity and even flexibility in the operation of an irrevocable trust through modernization of terms. While these techniques can be complicated, the clarity they can provide can give all parties access to tools that can help ensure that an irrevocable trust is managed more effectively.

Legal

The trustee of a property will need to take legal ownership of all trust assets. They also need to:

Properly title all trust assets
Accurately administer the assets according to the trust deed
Research claims against the trust
Oppose unfounded claims in court
Secure legal counsel when necessary
Ensure compliance with applicable laws

Accounting

Some of the trustee’s accounting duties include:

Properly title all trust assets
Accurately administer the assets according to the trust deed
Research claims against the trust
Oppose unfounded claims in court
Secure legal counsel when necessary
Ensure compliance with applicable laws

Investments and Custody

The trustee must create an investment objective following the trust’s instructions. They also must:

Delegate the day-to-day management of investments to approved financial advisors
Work with the financial advisors to promptly reinvest income from the trust
Monitor the advisors’ compliance with the trust’s investment objective
Provide cash management to meet the trust’s daily needs

Taxes

Among the trustee’s many responsibilities are creating and implementing the necessary strategies to minimize taxes. Other duties include:

Recording dates of asset acquisition and their cost basis
Providing information for annual trust tax returns with approved tax preparation vendors for the timely filing of returns
Promptly producing details for beneficiaries’ tax returns

Real Estate

If real estate is part of the trust, the trustee must oversee the maintenance, insurance and security of the property. Among other duties, they also must pay real estate taxes, assessments and liabilities and arrange for appraisals, titles, deeds and abstracts as required.

Trustees also must regularly communicate with beneficiaries to demonstrate the trust’s proper administration and ensure they understand their rights.

Contact Independent Trust Company for Your Trust Administration Needs

Now that we’ve reviewed the two trustee types and their duties, you can see what significant responsibility trustees must bear. Independent Trust Company has years of experience offering, trustee services.

Regardless of the reason that you created your trust, you can rely on our expertise to properly administer your family’s trust. Contact us today to learn more.

The Independent Trust Company is ready to discuss your Unique Asset and the ways we can support its inclusion in your family’s legacy for years to come.

We are a South Dakota Trust Company helping families succeed with generational wealth transfers by preserving their assets – as well as their legacy.

Please contact us here to begin the process. Or please call us at (605) 737-5100.