A trustee is a person or firm that holds and administers property or assets for the benefit of a third party. A trustee may be appointed for various purposes, such as in the case of bankruptcy, certain types of retirement plans or pensions, or to manage assets for someone. Trustees are required to make decisions in the beneficiary's best interests and have a fiduciary responsibility to them, meaning they act in the best interests of the beneficiaries to manage their assets.
A trustee is any person or organization that holds the legal title of an asset or group of assets for another person, called the grantor. A trustee is granted this legal title through a trust in which the they hold title to the assets held in trust for the benefit of others. The people or entities who benefit from the trust are called beneficiaries. A trust is a legal entity in which a person or party who owns assets (also called a trustor) gives another party (the trustee) title to those assets or property for the benefit of a third party. For example, a trust might be created to provide legal protection for the trustor's assets and ensure they are appropriately distributed. The trustee is charged with ensuring that the trustor's wishes are fulfilled. A trustee is thus responsible for properly managing all property and other assets placed in the trust for the beneficiaries. A trustee's specific duties are unique to the trust agreement and are dictated by the type of assets held in the trust. For instance, if a trust holds various rental properties intended to be used for income, it will be the trustee's duty to ensure those those properties are managed, maintained, occupied, and generating income. Trustees are also required to financially manage and oversee accounts within a trust when it is made up of other investments, such as equities in a brokerage account.
Trustees have a fiduciary duty to the trust's beneficiaries, which means they are required to put aside personal interests, beliefs, and biases to do what's best for the trust. All trustees have general guidelines and responsibilities, regardless of the specifics in the trust agreement. Trustees generally assume the following duties:
A trustee can be someone you know, but it might be best to find someone with experience. They should understand the trust being set up and know what their responsibilities are. For example, if the trust includes growing assets for your family's future generations, you'd want to appoint someone who understands how to grow wealth. There are generally three types of trustees:
A trustee administers and manages a trust fund. An executor manages and administers the estate of someone who has died and left assets to heirs through a will. An individual can name one person for each role or could appoint one to perform both roles. Like a trustee, an executor can be a trust company, a bank, or a trusted friend or family member. The executor must distribute assets in accordance with the will left by the deceased.
Trustees and executors must both follow the laws in their state when performing their duties. Choosing a trustee might be one of the most challenging tasks when creating a trust. It's tough to know which person or entity you can trust to administer your assets the way you want them to. Here are some considerations for choosing a trustee:
A trustee administers a trust based on the instructions left by the grantor. This can include communicating with beneficiaries, allocating funds to investments, distributing payments according to instructions, and much more.
A trustee has been given the responsibility of ensuring a grantor's assets are used the way they intended them to be.
A trustee must administer the trust per the grantor's instructions, be loyal to the beneficiaries, and deal with beneficiaries impartially. A trustee is someone who has been granted a fiduciary responsibility to care for the assets placed in a trust. There are many reasons for placing assets into a trust, from ensuring you have income in your later years to growing wealth for your family and having it distributed as income after you pass. All states have laws governing trusts and how they must be administered, so when choosing a trustee, it's essential for the person you choose to understand trusts and be up to the task. If you don't know someone capable of being a trustee, you can find wealth management companies, banks, trust companies, and attorneys specializing in administering trusts. |