The trustee is the person who manages all the property and assets that are included within a trust. A trustee has a fiduciary duty to act in the best interest of the trust and its beneficiaries.
Individuals and couples often decide to put some or all their assets into a revocable living trust for estate planning purposes. This legal arrangement can include aspects of a power of attorney and last will and testament and add clarity for loved ones.
While they are still alive, many people choose to be the trustee of their own revocable living trusts. However, once you pass, your planning will have appointed a new trustee to take care of the trust. You should ensure this person is aware of their responsibility and ready to handle your estate at any time.
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What Does It Mean If You Are a Trustee?
Being a trustee means you are legally responsible for managing the trust’s assets and distributions.
California law outlines numerous legal duties for trustees, including:
- Administering the trust by the terms of the document
- Being loyal to the beneficiaries of the trust
- Dealing with the beneficiaries impartially
- Avoiding conflicts of interest between you and the trust or beneficiaries
- Legally segregating and identifying trust property
- Prudently managing and investing the trust’s assets
As you can see, being a trustee requires taking on a lot of active roles. It is not an easy job, and therefore trustees can be paid for their work out of trust assets. However, due to their duties to beneficiaries, the trustee cannot overcompensate themselves.
What Does a Trustee Do When Someone Dies?
When you become a trustee after a grantor’s death, the first thing you need to do is identify and secure trust property. Locate the governing trust documents and take an inventory of all assets. Ensure you have control and access to all of the trust property.
For example, if one of the trust’s assets is a piece of real estate, you need to locate the deed and ensure the trust has a clean title to the property. If the trust has a significant investment account, you need to present your credentials to the investment service so that you can access the account, both online and in person.
The next step is to consult with professional financial managers and tax advisors. As a trustee, you are responsible for paying the trust’s taxes and setting up a responsible investment strategy. You may need to pay for appraisals of land or other valuable assets to have a firm grasp of the extent of the trust’s assets.
Once those tasks are accomplished, you can begin distributing assets to beneficiaries as outlined in the trust.
What Is a Trustee vs Beneficiary?
If you are the trustee for a revocable living trust, you are responsible for acting in good faith on behalf of the beneficiaries. Beneficiaries are those with interest in a distribution from the trust’s assets. They can be named in the trust document or qualify under a class listed by the trust’s creator.
For example, the person who drafted the trust, also known as the grantor, could list “all my grandchildren.” This provision allows future grandchildren to access the benefits of the trust even if they were not born when the grantor passed away.
You can be both a trustee and a beneficiary of the same trust. This type of arrangement is common in revocable family trusts, as the grantor does not want an outsider managing assets. However, being both a trustee and beneficiary can be challenging. Other beneficiaries may resent your control of the distributions or disagree with your management style or strategy.
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Who Has More Rights, a Trustee or Beneficiary?
There is another set of duties imposed on trustees by California law, and these focus on making sure a trustee is responsive to beneficiaries.
As a trustee, you have duties to:
- Supply the terms of the trust to beneficiaries upon request.
- Inform the beneficiaries of any significant events.
- Provide an accounting to beneficiaries upon request.
- Inform other beneficiaries if you receive a request from another beneficiary.
Beneficiaries have the right to request all these documents from a trustee. However, if they disagree with a trustee’s decisions and the trustee is not open to their feedback, the only remedy is through court action.
Conflicts between trustees and beneficiaries are resolved in probate court. Typically, probate courts are hesitant to interfere in trust management. Therefore, a beneficiary must have compelling evidence of incorrect management or distributions by a trustee to win judicial relief.
Whether you are a trustee or a beneficiary, these types of conflicts can be complicated and time-consuming. Your best bet is to consult with an experienced probate litigation attorney as soon as the conflict arises to determine the most reasonable course of action.