The Fiduciary Duties of a Trustee

A trust is a legal entity that allows you to set guidelines as to how your assets will be managed when you’re no longer able to manage them yourself, either through incapacity or death. To create a trust, you move whatever assets you choose into the trust, which then becomes the legal owner of your assets. In estate planning, there are any number of trusts that your Long Island trust attorney can create to help manage your assets. These include special needs trusts, charitable trusts, living trusts, and many others. While the objectives and purposes of these trusts differ, they all have one thing in common – a trustee.

A trustee is selected by the creator of the trust – known as the grantor or the settlor – to manage the trust assets according to the rules set up by the grantor. These rules can dictate anything from how an asset is to be used, to when it can be used. For example, you can dictate that your Picasso may never be sold, and that your reckless nephew may only receive his inheritance upon his 40th birthday. 

If you are the trustee of a trust, it’s important that you understand your obligations. These include:

• Fiduciary Duty – Trustees must act exclusively in the best interest of the beneficiaries. This means avoiding conflict and self-dealing, and remaining scrupulously impartial if there are several beneficiaries.
• Asset Management and Protection – A trustee must manage and protect the trust assets in a prudent manner, preserving value through proper investing, paying all necessary expenses, and defending the trust against legal claims.
• Record Keeping – A trustee must maintain accurate and detailed information about transactions, income, and expenses.
• Communication – It’s imperative that the trustee keep in contact with the trust beneficiaries regarding all material information related to the trust. 
• Distribution – The trustee must distribute the trust’s income or principal strictly according to the conditions and the timelines set forth in the trust by the grantor.

Failure To Properly Manage Trustee Obligations

A trustee has fiduciary duties of care, loyalty, and good faith. Failure of a trustee to abide by these fiduciary duties and other trust obligations can result in personal financial liability to the trustee through lawsuits and penalties. It’s also possible for a trustee to be removed for failure to meet his or her obligations. Among the most common reasons for liability and/or litigation is for self-dealing. That is, a trustee has used trust resources for himself.   

Many trustees hire firms such as law firms and accounting firms that offer fiduciary services to help them ensure they are properly meeting their obligations and avoid legal recourse by the beneficiaries of the trust. 

Contact Davidow, Davidow, Siegel & Stern, LLP

Here at the law firm of Davidow, Davidow, Siegel & Stern, we have many years of experience helping our clients set up trusts that meet their financial and personal needs. In fact, we have over 100 years of experience in estate planning, probate, and estate administration. Contact us today to see how we can help you. 

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