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What duties do trustees have?

On Behalf of | Jan 13, 2022 | Estate planning |

If a loved one named you trustee or you want to choose trustee candidates for your trust, you deserve to know the role’s responsibilities. Once you understand a trustee’s duties, you have a better idea of how to narrow your options or decide if you have the right disposition for the role.

The CPA Journal explains trustee obligations while administering a trust. Do right by a loved one or yourself by understanding the role inside and out.

Document duties

Trust documents spell out the trustee’s responsibilities and powers. The role’s primary obligations involve investing principal and overseeing distribution timing and amount. Depending on the trust, the trustee could have the ability to make a distribution to a specific heir while excluding other heirs.

Trust provisions

A trust could contain a provision that lets trustees make unbalanced distributions to parties belonging to the same beneficiary category, which is sprinkling power. This power allows trustees to prioritize making distributions to less-wealthy beneficiaries first without giving distributions to heirs in higher tax brackets. Because such a provision and power could cause outbursts amount beneficiaries, trustees must think carefully before using this power.

Invasion of principal

Trustees may have the power to invade principal for a beneficiary’s benefit. The trust may only permit this after examining the beneficiary’s standards of education, health and support. Before exercising this power, it makes sense for trustees to ask the grantor to draft a description or letter indicating when this option becomes available.

Becoming a trustee represents a massive responsibility. When candidates and grantors have all the facts on what makes a good trustee and the role’s obligations, individuals have an easier time making well-informed decisions.