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Guide

What Does a Trustee Do? A Guide for People Planning Their Estate

Your trustee makes sure your assets are distributed to your heirs as you wish. Read more about the duties and responsibilities of this important role.

Trusts are a key component of estate planning. They help ensure that your property is distributed to your heirs in accordance with your wishes after you have passed away or become incapacitated.

 

But establishing a trust as part of your estate plan is just the beginning. You also need to decide whom you will name as your trustee.

 

Your trustee is a critical decision

John R. Davis, Cadence Bank Executive Vice President, Trust and Asset Management, says the choice of a trustee is crucial to ensuring the provisions of your trust and other estate planning documents are followed as you intended.

 

“The duties and responsibilities of a trustee can be wide-ranging and complex,” says Davis. “For example, they typically include filing required tax returns and paying any taxes that are due, making prudent investment and asset management decisions, and distributing assets as directed by your trust and estate planning documents.

 

“Therefore, you should put just as much thought and planning into the selection of your trustee as you do into the creation of your trusts and other estate planning documents,” Davis adds.

 

Duties of the trustee

Specific duties of a trustee after the death of the grantor (the person establishing the trust and naming the trustee) typically include the following:

 

  • Collecting all death benefits (such as those from life insurance policies and retirement plans) and placing them in an interest-bearing account until they can be distributed
  • Notifying the bank, brokerage firm and other interested parties of the grantor’s death and providing them with a death certificate
  • Obtaining a list of all assets and determining their values, including getting appraisals, if necessary
  • Conducting an estate sale to dispose of personal effects and household goods, if necessary
  • Filing federal and state tax returns, paying any taxes due and reporting results to the beneficiaries
  • Maintaining accurate records related to all expenses (such as funeral and medical expenses) and financial transactions
  • Dividing assets to be distributed to beneficiaries according to the instructions contained in the trust and the last will and testament
  • Investing assets held in trust in a prudent manner to achieve reasonable growth for beneficiaries with minimal risk

In addition, trustees may not commingle trust assets with their own assets, use trust assets for their own benefit (unless this is authorized by the trust) or treat trust beneficiaries unequally (unless the trust stipulates that this is allowed).

 

Perhaps most importantly, a trustee has a fiduciary responsibility to manage and distribute trust assets responsibly and productively. “The trustee is morally and legally obligated to act solely in the best interests of the beneficiaries and follow the instructions detailed in the trust document,” says Davis.

 

Should you choose an individual or corporate trustee?

People often name a family member or close friend as their trustee, reasoning this person knows them well and will be best-suited to handling these responsibilities. But the responsibilities of a trustee are complicated and time-consuming, and they may be overwhelming for someone with little trust or estate-planning knowledge — or limited time to perform the duties listed above.

 

“I recommend you strongly consider designating a corporate trustee,” says Davis. “This helps ensure that your estate will be administered properly and the terms of your trust and other estate planning documents are followed accurately and objectively, with a high level of expertise. A corporate trustee can also help provide peace of mind to family members and heirs during a difficult time.”

 

Another benefit is that a corporate trustee is subject to strict federal and state regulations to act as a fiduciary in the best interests of the grantor and beneficiaries. “Unlike individual trustees, corporate trustees will not allow personal feelings or emotions to interfere with their duties,” says Davis. “Despite their best intentions, individuals are sometimes influenced by emotions when fulfilling their duties as a trustee, which can lead to decisions that are unequal or unfair.”

 

Weighing the options

There are fees associated with hiring a corporate trustee, however. If an estate is relatively small and simple, an individual may be able to handle the trustee responsibilities just fine and save the estate and beneficiaries money. Of course, this assumes there is an individual who is both willing and able to do so.

 

As a general rule, the fees associated with hiring a corporate trustee are usually justified for estates worth at least $1 million, says Davis. “In this scenario, I believe that hiring a corporate trustee is generally well worth the money,” he says.

 

Corporate trustees can sometimes pay for themselves when you consider the fact they may be able to generate higher investment returns for beneficiaries. “Also, corporate trustees are highly trained and experienced professionals, which can help ensure that your estate is settled faster and more efficiently,” says Davis.

 

“It’s hard to put a price tag on this for heirs and beneficiaries who are likely going through very difficult circumstances.” 

 

Learn more about estate planning with Cadence Bank

If you would like to learn more about estate planning and choosing a trustee, download the free ebook, "Estate Planning: Why It’s Important and How to Get Started.”

 

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

 



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