A trustee is a person who serves a vital role in any estate plan that includes a trust. We talked about trust several times in the past, but clarifying what a trustee is, what that person’s duties might be, and how he or she will protect your interests is important, especially for people who are unfamiliar with trusts or estate planning in general.
While different trusts might require trustees to perform different types of duties, there are some general issues that are common to every trustee, no matter what the terms of the trust say. So, here are some essential concept you should understand about trustees.
What is a trustee?
In the past we have used the analogy of thinking of a trust as like a kind of publicly-held corporation. Like a corporation, a trust doesn’t really physically exist, but has a legally recognized existence. Further, publicly-held corporations are run by people who don’t own it. They may be minority shareholders, but hold an executive position making them responsible for ensuring that the corporation is managed properly.
Similarly, a trust is run by someone who does not own the trust or the property the trust owns. Rather, a trustee is there to ensure that the trust property is managed properly. This person is known as a trustee.
It’s important to note that a trustee doesn’t necessarily have to be a person. In some situations an organization, such as a bank or trust company, will serve as the trustee. Even though an individual, or group of individuals working for the bank or trust company, might have the actual responsibility of managing the trust on a daily basis, it is the organization itself that is the trustee named in the trust document.
What does a trustee do?
A trustee, as we mentioned above, is primarily responsible for ensuring that the trust he or she manages works as it was intended to work. Trusts typically own various types of property, and do so for specific reasons. The trustee is there to manage that property and make sure it is only used for its intended purposes.
For example, let’s say that you create a last will and testament in which you create a testamentary trust (one that comes into effect after your death and requires probate) that will own property for your grandchildren until they are old enough. You want your trust to be there to pay for any college costs your grandchildren might incur, and appoint a trustee to make sure that the trust funds are used only for this purpose. In this situation, the trustee will be able to use the money or property you placed in trust to compensate your grandchildren for their tuition, college living expenses, and other costs associated with attending college. The trustee cannot simply use the money for any reason he or she desires. A trustee has a fiduciary duty to you and beneficiaries. That means they must ensure that your trust is managed in accordance with the rules you establish.
To learn more, please download our free Estate Planning for seniors in Oklahoma here.
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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