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Understanding the Role of a Trustee

Job Description Series, Part II: Trustee responsibilities

If you had to name one person or entity to put in charge of all of your assets, who would that be? Who would you want managing your assets, deciding how they are going to be invested and determining when/how to spend your money?

If you have completed an estate plan that involves a Trust – you have already identified this person or entity when you selected a Trustee. And, if you are considering a Trust as part of a future plan, you should know that the selection of a Trustee is one of the most important and influential decisions associated with your plan.

While not everyone needs a trust as part of their plan, many of us do. For example, I have two trusts for my family. One revocable living trust (because I have minor kids) and one third party discretionary trust (because I have a daughter with Down syndrome). If my wife and I pass away or if the survivor of us is incapacitated, we need someone we trust to manage all of our assets.

The Trustee’s Jobs include:

· Management. The Trustee must collect, possess, manage and invest all of the Trust assets. Remember, a trust can own a wide variety of assets. With only a few exceptions, anything you can own a trust can own. All investments must be prudent and reasonable.

· Trust Distributions. The written terms of the trust will dictate how/when trust assets are to be distributed. As an example, for my younger two daughters, there are standards or guidelines for when trust assets can be used for their benefit. While they are minors it can be used to pay for things like healthcare and school costs. Other trusts – like the third party discretionary trust we have for our daughter with Down syndrome – leaves all trust distribution decisions to the trustee (which is why our roadmaps are so important). Ultimately, the terms of the trust will drive all trust distributions.

· Communication. The Trustee has a duty to be in communication with the beneficiaries. The beneficiary's right to information about the trust will also be determined by the terms of the trust, but all Trustees have a duty to communicate with beneficiaries and be aware of when their needs might lead to the need for a trust distribution.

· Hire Professionals. The Trustee may be responsible for things like tax returns, real estate decisions, investment decisions and other situations where professional advice is needed. In those situations, not only can a Trustee hire a professional—but they should always hire a professional. While Trustees absolutely should rely upon their natural talents when carrying out some of their duties, Trustees have also found themselves in troublesome situations when they fail to hire professionals in certain circumstances.

How do you pick the right person?

For some clients, this is an easy decision; but for others it can be remarkably daunting to think about who to place in such an important role. The options include family/friends, banks and even attorneys sometimes play that role. Regardless of who you pick to be the Trustee, make sure they are someone you trust and someone who has the requisite knowledge and desire to carry out these duties.

If you have questions or doubts about who to pick – a trust advisor like those at Philipps & Graham can help guide you through this important decision.

Ohio Residents:

Call us at 614-760-1801 to schedule a complimentary planning consultation.

The professionals at Philipps & Graham can help you design your plan for the future.



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