Being named as the trustee of a Massachusetts trust can be both an honor and a burden. It implies that the person creating the trust has the utmost respect and faith in your abilities and trustworthiness, but it also confers certain obligations that you must meet. As a newly appointed trustee you probably have a lot of questions. But with the right information and a good advisor, your duties as a trustee do not have to be overwhelming and you can be confident that the faith that has been placed in you has been well founded.
Here are some important tips to get you started when appointed as a Massachusetts trustee:
1. Read the trust document. The trust sets out the rules under which you will operate, so you should be familiar with its terms. If you don’t understand your responsibilities under the trust, ask an estate planning attorney to explain them to you.
2. Establish a trust checking account. Your local bank can explain what is needed to open a trust account. All income and expenses of the trust should go through this account. While you can and should invest trust money, a checking account will enable you to make distributions and payments and keep track of them.
3. Keep the best interests of the beneficiaries in mind at all times. Trustees have what is called a “fiduciary” duty to trust beneficiaries. This is an extremely high standard and trustees who act adversely to a beneficiary’s interests may be open to liability.
4. Don’t have any personal financial dealings with the trust. The trustee is in charge of managing trust funds, but it’s the beneficiary’s money. The trustee cannot borrow money from the trust or lend the trust money to anyone and should keep their personal affairs separate from the trust at all times.
5. Provide annual accounting to beneficiaries. A trustee should update beneficiaries and anyone else indicated in the trust with an annual statement of trust activity. This can be a copy of the checking and investment account statements or a more formal trust account prepared by an accountant or attorney.
6. Invest trust funds prudently and productively. Trustees should not just leave trust funds in a savings account or throw them all into a promising new company. You need to manage trust funds as a prudent investor would. Often, it’s a good idea to seek professional investment advice.
7. Keep in regular contact with the beneficiaries to understand their needs and be responsive to them.
8. Familiarize yourself with any public benefits the trust beneficiaries may be receiving and make sure you do not jeopardize the beneficiaries’ eligibility. In some cases, receiving a poorly timed trust disbursement can disqualify someone from public benefits that they desperately need.
9. File annual income tax returns for the trust.
10. Don’t go it alone. Get professional advice to make sure you are correctly fulfilling your role. Never be afraid to ask for help.
