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The Heritage Law Center, LLC Blog

How to Be a Good Trustee

POSTED ON: November 18, 2019

When someone creates a trust, they must designate a trustee. The trustee is responsible for managing the trust either when the trust is formed or in the future, depending on the type of trust. Many people naturally consider giving a family member or close friend this responsibility.

The first thing you have to do to be a good trustee is to read the trust document and make sure you understand it. Ask questions if you need some clarification. Here are some other tips to help you be a good trustee:

Financial Responsibilities

  • Set up a checking account for the trust, which will be used or tracking all income and expenses.
  • Always act with the best interest of the beneficiaries in mind as you have a fiduciary duty to do so.
  • Invest the funds wisely by diversifying the trust portfolio using stocks and fixed-income securities. It’s also a good idea to get professional investment advice.
  • File annual income tax returns for the trust. Exception: revocable trusts when the trust grantor serves as trustee can use the grantor’s Social Security number.
  • Never involve your personal finances with the trust. For example, don’t loan money from the trust to yourself or anyone else.
  • It’s always a good idea to get professional guidance to make sure you are fulfilling your trustee duties.

Communication with Beneficiaries

  • Provide an annual accounting of the trust activity to the beneficiaries. For example, provide copies of checks and investment account statements. If you don’t keep the beneficiaries in the loop, they may become suspicious of what you’re doing. Clear and open communication is important.
  • Maintain ongoing communication with the beneficiaries to make sure you understand their needs. Documenting that communication with emails to the beneficiaries or a call log of the conversations is a great way to keep track of the interactions.
  • Make sure you aware of any public benefits the beneficiaries may be receiving. You don’t want to cause any issue with their continuing eligibility for those benefits.

Being a trustee is a lot of responsibility, and beneficiaries can challenge your decisions. By following the guidelines above you’ll put yourself in the best position to show that you’re fulfilling your responsibilities.