What is a Trustee?
A trustee may be a person, group of people, or an organization appointed to manage a trust, which is a legal arrangement in which a grantor (also known as a trustor) transfers assets to an account (the trust) for the benefit of designated beneficiaries. The trustee is the legal titleholder to the trust assets and has the responsibility of managing them according to the terms of the trust agreement and relevant New Jersey laws. Thus, the trustee should be someone who both has the skills and ability to administer the assets in a trust, and is an individual that the grantor has confidence in to carry out their wishes.
This responsibility may seem daunting to someone who has just been named as a trustee for a loved one. In many cases, when a family member is appointed as trustee, the grantor has not considered whether that person has the knowledge or experience to manage extensive financial affairs, the time to manage the trust, or the ability to act fairly when it comes to other family members. If you have been named as a trustee and are overwhelmed by the responsibilities bestowed upon you, retaining an experienced New Jersey trust attorney may be a smart move to give you advice and assistance with trust administration.
What Responsibilities Does Being a Trustee Entail?
While each trust agreement is unique, the main duties of the trustee will be to manage the assets of the trust and to administer it according to the wishes of the trustor. Typically, these duties include:
- Fiduciary duty: A trustee has a fiduciary duty to act in the best interests of the beneficiaries. As such, the trustee must exercise care, loyalty, and prudence in managing the trust assets and making decisions on behalf of the beneficiaries.
- Understanding the terms of the trust: The trustee is required to understand the terms of the trust and administer the assets according to those terms as they were written. The trustee must ensure that assets are safely under their control, and that all records are in order.
- Protecting the assets: The trustee is responsible for managing and protecting all assets in the trust, from the financial reconciliation of bank statements and investment accounts to the maintenance of real estate.
- Investment of financial assets: The trustee, as a fiduciary, must adhere to prudent investor standards. This means that the trustees primary duty is to guard the principal of the assets instead of investing them for the greatest return.
- Keeping detailed records: The trustee is accountable for the assets in the trust and must keep detailed records of everything done in the trust administration process.
- Paying and preparing taxes: The trustee must make sure that the annual tax return for the trust is prepared and that taxes are paid each year.
- Distribution of funds to the beneficiaries: The trustee must distribute the assets to beneficiaries according to the terms of the trust. Some trustees are given a great deal of discretion of the distribution of assets and may have to decide when beneficiaries may or may not receive funds.
- Mediate disputes: In some cases, conflicts may arise between beneficiaries. In such instances, the trustee must remain a neutral party and attempt to resolve these disputes before they escalate.
The trustee has a legal obligation to perform these duties—often for a very long time—regardless of their expertise in accounting, asset management, investing, or otherwise. This is why many trustees decide to retain a professional New Jersey trust attorney to alleviate the confusion and stress arising from the duties of trust administration.
How Can I Hire the Right Professionals?
Successful trust administration requires deft handling of many financial and investment concepts. However, many trustees lack such skills and experience, and are at risk of making mistakes when administering a trust. Unfortunately, a trustee can be held liable for these mistakes.
Fortunately, these mistakes, and therefore liability, can be avoided by retaining an experienced New Jersey trust attorney throughout the trust administration process. In most cases, the trust will empower the trustee to hire professionals to help properly administer the trust and pay reasonable fees for these professionals from the trust.
Having the assistance of an attorney can help ensure that a trustee is not making any mistakes or getting mixed up in any disputes between beneficiaries. The attorney can help the trustee make good decisions or find the right professionals for investment or tax strategies. The attorney can also provide open communication between all parties—the trustee and the beneficiaries—so that everyone can work collaboratively.
If you have been named as a trustee but want guidance and assistance to fulfill your duties, contact our experienced trust attorneys at AJC Law today at (201) 273-9763 to schedule a consultation. At AJC Law, we would be happy to answer any questions you have about setting up a trust, naming a trustee, or administering an existing trust.