If you have been named as Trustee or Successor Trustee of another’s Irrevocable Trust, you may be wondering what exactly the role entails. For Successor Trustees, your duties will not begin until the current Trustee is no longer able or willing to perform in that capacity. However, if you are currently serving as Trustee, there are some things you need to know.
In Nebraska and the 30 other states that have enacted the Uniform Trust Code[1], a Trustee is tasked with the following duties[2] (among many others):
- Duty to Administer Trust
- Duty of Loyalty
- Impartiality
- Prudent Administration
Duty to Administer Trust
The primary duty of a trustee is to follow the terms and purposes of the trust. When the terms of a trust are silent or if it does not address a particular issue, a trustee must use good faith when administering the trust.
Duty of Loyalty
A trustee owes a duty of loyalty to the beneficiaries. Expressed in a different manner, a trustee must not place the trustee’s own interests over those of the beneficiaries. Most violations of the duty of loyalty concern transactions involving the trust property, but breaches can also take other forms. For example, a trustee administering a trust owning a personal residence cannot receive a commission from an insurance agent for the procurement of a homeowner’s insurance policy for the home owned by the trust.
Impartiality
If a trust has two or more beneficiaries, the trustee is required to act impartially in investing, managing, and distributing trust property, taking into account the respective interests of each beneficiary. The duty to act impartially does not mean the trustee must treat all beneficiaries equally. Rather, they must be treated with respect to the terms and purposes of the trust.
Prudent Administration
The trustee is held to the prudent person standard when administering a trust and must exercise reasonable care, skill, and caution. That is, a trustee must act as prudent person would, by considering the purpose, terms, distributions, and other relevant provisions of the trust.
For additional information on your duties as Trustee, contact your Wealth Advisor, a member of the Wealth Enhancement Group or your estate planning attorney. Also, click here to watch our Executor Planning Checklist video.
[1] https://uniformlaws.org/Act.aspx?title=Trust%20Code
[2] Uniform Trust Code §§ 801-804; Neb. Rev. Stat. §§ 30-3866 – 30-3869