Trustee of a Revocable Living Trust

This section explains your role as Trustee and details what a Revocable Living Trust is and does, so that you can better understand your duties and responsibilities as Trustee.  

First, what is a Trust? A Trust is a legal entity that can own assets. Like a Will, a Trust includes specific instructions for who will handle final affairs and who will receive assets during life, and after death. The person who has established the Trust is referred to as the “Trustor,” “Grantor,” or “Settlor.” A Trustee is the individual or business who manages the assets in the Trust. 

A Revocable Living Trust can often be used to help avoid probate, facilitate tax planning, provide for management during periods of incapacity of the Grantor (without the need for a guardianship or conservatorship), address family circumstances, and provide for Estate distribution to beneficiaries.  

For simplicity, a Trust is simply a set of instructions, and is a structured form of ownership that holds assets for the benefit of certain persons or entities. The Trust contains the Grantor’s instructions for their care and the care of their family if they become disabled, as well as for the distribution and management of property, accounts, and assets at the Grantor’s death. A Revocable Trust can allow those instructions and financial affairs to remain private and ensures that the Grantor’s instructions are carried out efficiently and without unnecessary judicial involvement.   

Second, what do you need to know as Trustee? You should familiarize yourself with the Trust document of which you are Trustee and read through the provisions when you begin serving as Trustee. The Trustee should also determine the location of important papers, and Trust assets (including the original Trust Agreement, Wills, Powers of Attorney, etc.).  

As Trustee, you have what is called a fiduciary duty. A fiduciary duty is the legal responsibility of a person who has accepted the duty of acting for the benefit of another. Obviously, this requires integrity and prudence in dealing with the property entrusted to the fiduciary. Breach of a fiduciary duty can result in personal liability (e.g., the fiduciary’s personal funds may be required to remedy the breach). 

It is a Trustee’s fiduciary duty to manage and distribute the Trust assets for the benefit of the beneficiaries of the Trust, in good faith and according to the instructions contained within the Trust document.

A fiduciary acts in good faith so long as they do not act (or fail to act) out of intentional wrongdoing, with indifference to the beneficiaries’ best interests, or in the fiduciary’s own improper personal interest.  

Remember, you are safeguarding the Trust assets for the benefit of the beneficiaries. During the Grantor’s lifetime the Grantor is the Trust’s beneficiary. After the Grantor’s death, the Trust Agreement defines the Trust’s beneficiaries. You cannot mix Trust assets with your own or use Trust assets for your own benefit unless the Trust authorizes it.  

Trustee’s Duties and Responsibilities: When you serve as a Trustee, you may act for and conduct business on behalf of the Trust without the consent of any other Trustee unless otherwise directed in the Trust. Here are a few important duties and responsibilities of a Trustee:

  1. Administer or manage the Trust according to the requirements of the Trust Agreement. 

  2. Protect and preserve Trust property. 

  3. Treat all beneficiaries the same (unless the Trust Agreement authorizes it). 

  4. Take care to invest Trust assets prudently and with minimum risk. 

  5. Keep accurate records, file Trust tax returns, and report to the beneficiaries as the Trust Agreement dictates.  

As Trustee, it is common to hire professionals for guidance, specifically for any accounting and investment questions. An attorney, for instance, can help with any legal questions or concerns. However, the ultimate responsibility for management of the Trust and its assets falls onto you as Trustee. 

A few practical things to know about the Trust as Trustee are a) the name of the Trust, b) when the Trust was established, c) whether there are any amendments or restatements, and d) the tax identification number of the Trust. 

We have prepared a Certificate of Trust. This document is not legally binding but will have all of the above information. Should you need it, you can also use this document to help you complete bank forms or open accounts in the name of the Trust.

 When acting as Trustee you have the legal authority to spend and invest the money and property in the Trust for the benefit of the beneficiaries. If the Grantor is no longer acting as Trustee, you may be required to diversify assets and adhere to reporting requirements.  

Trust Administration After the Death of the Grantor: Typically, at the Grantor’s passing, an “Administrative Trust” is created simply to gather the Trust assets, ensure all debts and expenses are paid, and file any required tax returns relating to the Estate. The Trustee’s job in this situation is similar to an Executor’s job, described later in this document.  

First, collect all necessary estate planning documents (Trust and Will documents). Directions for properly administering the Trust are detailed in the provisions of the Trust. Second, Trustees are required, in some cases, to serve written notice to Trust beneficiaries regarding the beginning of Trust administration (the Trust will provide information to ensure that a beneficiary’s notification is valid). Finally, if you are struggling to interpret the terms of the Trust, or require a complete detailing of the process, please consult with a probate attorney and or an estate planning attorney (for trust administration) before taking any further action regarding the Trust.

To make an appointment, please contact Elle Van Dahlgren Law, LLC by calling 302-407-5009 today.