The last several posts have described the importance in selecting the appropriate person to be the trustee, the qualities for a good trustee, the powers the trustee can be given to oversee the trust and some of the trustee’s responsibilities. Here are the additional trustee responsibilities.
- Accounting. One of the most difficult tasks for trustees may be keeping track of all the various income, expenses, taxes and distributions that are incurred by the trust. Many trusts require the trustee to provide annual accounting to the beneficiaries, so that beneficiaries can ensure all the finances of the trust are in order. Further, in strict trust accounting, the trust must keep track of and report on principal and income separately.
- Delegation. Luckily, a trustee does not have to take all of this responsibility on their own. A trustee can delegate responsibilities out to other individuals. For example, a trustee can hire a financial advisor to make investments, accountants to keep the books and lawyers to advise on legal issues. Like any successful business venture, having a good team in place to advise a trustee will make the trustee’s work that much easier.
- Fees. Trustees are entitled to reasonable fees. Often, when a trustee is a family member, they do not accept fees. The issue becomes: what is reasonable? Reasonableness may be particularly important in the case of banks, trust companies or law firms that charge a percentage of the funds under management as a fee to the trust. In the alternative, some professional trustees charge an hourly fee. If a trustee takes a fee but hires an outside consultant, such as an investment advisor, the trustee should receive a smaller fee because of the delegation of work to the outside consultant.
- Trust Terms. The trustee must read and understand the trust documents. The trust is a road map left by the settlor directing what actions, duties, powers and responsibilities the trustee can take. Without a clear understanding of the trust document, the trustee is more likely to make an error endangering the trust and the beneficiaries.
So, I am going to hold off for on more post on why having co-trustee or co-guardian, or co-whatever is a bad idea. I know the suspense can be unbearable. (I hope you like my sarcasm.)