If you are considering setting up a trust or have been named as a beneficiary of one, you may have many questions about the roles and responsibilities of the trustee for that trust. Following is a brief overview.
Asset collection and protection: Two of the trustee’s key responsibilities are collecting assets earmarked for the trust and ensuring the protection of those assets. For instance, if real estate is included as a trust asset, the trustee is responsible for the maintenance and upkeep of the property and maintaining appropriate insurance on the property. In the case of financial assets, such as cash or securities, the trustee must maintain one or more separate accounts on behalf of trust beneficiaries.
Investment oversight: The trustee ensures there is a plan in place to address the needs and interests of current and future beneficiaries. Typically, trust investments are expected to generate income for beneficiaries while also retaining and reinvesting principal. In some cases, the trustee may have the authority to make distributions of principal to beneficiaries.
Taxes: The trustee reports all income generated by trust assets and pays tax on any undistributed income and capital gains realized by the trust. In addition, the trustee informs beneficiaries of the amounts that they must report on their personal income tax returns as a result of trust distributions.
Recordkeeping: The trustee is responsible for documenting every transaction that takes place in the trust accounts. Prior to final settlement, the trustee must demonstrate to the beneficiaries that all assets and income have been properly administered and distributed.