Categories
Concrete

How to act as a trustee

How to act as a trustee

A trustee is the individual appointed to administer assets or property for the benefit of a third party. A trustee could be appointed for the purpose of bankruptcy, a charity or certain kinds of retirement plans, but the most common is a trust.

A trust is a legal agreement designed to control how an individual leaves an estate to their heirs. Many people choose to create trusts to protect the interest of their beneficiaries. Also, trusts help them avoid the costs of probate or working with the courts to transfer wealth. The owner of the trust, known as the grantor, must appoint a trustee to administer their wishes outlined in the trust. While it may seem like an honor to take on the role of a trustee, it comes with significant responsibilities. We’ve broken down what a trustee is, their responsibilities and duties, and how to appoint one.

What Is a Trustee?

A trustee is an individual – typically a lawyer, accountant or family member – responsible for administering the wishes of the grantor for the benefit of a third party. The most common type of trustee is a successor trustee who is responsible for handling property and other assets within the trust in the case that the grantor dies or becomes incapacitated. All trustee duties are distinctive to the specific trust agreement and directed by the type of assets in the trust. Additional responsibilities of a trustee may include tax filing for the trust and distribution of assets according to the guidelines of the trust.

There are very few qualifications required to serve as a trustee. A grantor can appoint someone a trustee as long as the individual is at least 18 years old and is not likely to become bankrupt or mentally incompetent. Grantors can also be the trustee themselves, as long as the trust is a revocable living trust. This means the trust can be changed during the grantor’s lifetime. However, if the trust is an irrevocable trust, the grantor must name another individual as the trustee.

What Are the Duties and Responsibilities of a Trustee?

Fiduciary

One of the most critical responsibilities of a trustee is the fiduciary or loyalty duty. A trustee must put the interest of the trust above all others. The fiduciary duty obligates a trustee to maintain five essential responsibilities:

  • Protect and preserve the trust’s property and assets.
  • Defend all beneficiaries and the trust against legitimacy challenges.
  • Separate the trust’s assets and property from the trustee’s property. Trustees who co-mingle assets are liable for any losses as a result of combining wealth.
  • Handle all assets with care and attention to detail. Complex assets may require greater attention to detail.
  • When acquiring, selling, managing or investing the trust’s property, the trustee must proceed with caution.

Typically, these duties and responsibilities require a substantial commitment. The fiduciary standard requires that the trustee pay closer attention to the investments and assets of the trust than their own accounts.

Asset and Property Management

How to act as a trustee

Beyond the fiduciary standard, a trustee may need to oversee bank accounts, file tax returns, and pay bills and expenses. Trustees may also collect rent or unpaid debts, obtain insurance or complete other tasks that are written into the trust or mandated by state law.

A trustee must manage the funds and assets of the trust with the utmost care. Some of the other asset and property management duties that come with being a trustee include:

  • Distributions. Some trustees may have discretion when it comes to making distribution decisions. Trustees need to evaluate the beneficiaries’ needs, other sources of income and responsibilities to the other beneficiaries. Often, the trustee must set limitations and boundaries on the use of all trust assets.
  • Taxes. Depending on the type of trust, the trustee must file tax returns and pay any tax obligation. If the trustee is a good record keeper and allows the accountant to prepare the tax documentation, this task may not require a lot of attention.
  • Delegation. Although you cannot delegate your trustee obligations, you can, however, delegate some tasks. For instance, the trust may allow you to hire financial advisors to handle wealth management, accountants to manage bookkeeping and lawyers to advise the interpretation of trust guidelines.

Record Keeping

A trustee must keep impeccable records of all the happenings related to their duties and responsibilities. Good record keeping should include keeping a detailed list of all assets received and spent, as well as receipts and documentation of all trust expenses. Even if a trustee makes a decision with the best intentions in the interest of the beneficiaries, it could still be called into question. And, that decision may even result in litigation if not properly documented.

How Do You Appoint a Trustee?

You can appoint a trustee in several ways. Generally, the individual that develops the trust appoints the trustees. You can have up to four trustees. Many grantors appoint their executors to also act as trustees. Similar to an executor, you can request professionals to act as trustees, such as an accountant or lawyer. As the case with many professionals, they may require a fee for their services.

Choosing one or more trustees may depend on the size and nature of the trust. Therefore, it’s wise to discuss the intricacies with any trustee candidate. When selecting potential trustees, you may want to consider individuals with knowledge of complex matters. These matters can include taxation, fiduciary standards, management of securities and trust issues. Additionally, a grantor may wish to interview corporate trustees. This could help them understand how they work and could contribute to the preservation of their wealth.

Once appointed, that individual will be stated in the trust as the trustee. This document may also be known as the declaration of trust.

The Bottom Line

How to act as a trustee

Although a grantor can choose just about anyone to be the trustee of their trust, the role comes with significant responsibilities and duties. A trustee will execute the wishes outlined by the grantor while keeping the beneficiaries’ best interests in mind. Be sure to consider all the duties and responsibilities that come with the role if you’re appointed the trustee of a trust or are looking to appoint a trustee for your own trust. With a little time and careful thought, the right trustee will be selected for the trust.

Certification of trustee is when the holder of the trust determines who has the power to move assets around within a trust. It also gives the trustee the power to sell or bequeath assets to other parties. You need to name a person who you have certainty in with the assets in the trust, as this person will have a significant responsibility.

The Definition of a Certificate of Trust

When creating a revocable living trust, you are acting as a trustee. This means that you can move property within the trust at will, even dissolving it if you wish to do so. When doing business, banks, lenders, and other types of financial institutions may want to confirm that some assets are still within the trust and that you can still access them.

A certification of trust is a document that is used to certify that a trust was established. It provides important information, like the name of the trust, the trustees, and the date it was formed. It is also referred to as an abstract or memorandum of trust. It provides substantiation that property is being held in the trust.

This certificate will do the same job with an irrevocable trust. A certification of trust is a type of self-certification. This means it is made by the trustee as a declaration on penalty of perjury.

What the Certificate of Trust Includes

While the certificate requirements will be different in each state, it generally provides the following:

  • The identification of the trustee who is in charge of moving, selling, or otherwise giving away property in a trust
  • It will cite the creation of the trust and any changes that are made from the original trust.
  • If its a revocable trust, it will explain who is allowed to revoke.

Advantages of a Certificate of Trust

One advantage of a certificate of trust is that it does not include information that you want to keep private. It will not list your beneficiaries, what they are going to inherit, or when they will receive it. This permits your trustee or you to conduct business while not disclosing information that you want to keep private.

What is a Certification of Living Trust?

Another name for the certification of living trust is the certification of inter vivos trust. A living trust is sometimes referred to as a family trust or inter vivos trust. They make sure that all assets acquired are in the name of the trust.

Banks and brokerage firms require that when you are opening a new account you need to provide a copy of the trust. It is also requested from escrows when you purchase real estate. Some don’t want to provide a copy of the trust since it has private information inside, which includes the name of their children. The certificate of inter vivos trust will provide the necessary information to facilitate a transfer from the trust to your banking institution, transfer agent, or other third party.

It will also confirm that the trustee has the authority to act for the trust. It will prevent anyone from getting into the trust that should not, including individuals and other institutions that have no business doing so.

What is a Memorandum of Trust?

A memorandum of trust is also a certification, abstract, or certificate of trust. It is a shorter version of the trust certificate. It provides institutions with information they need, but allows you to keep some components confidential. You are not required to provide the names of beneficiaries. It is almost always accepted in place of a regular trust.

States with Their Own Certification Rules

A lot of states will have their own laws regarding trusts. They state that if a certification of trust has certain information, the institution has to accept it in place of the whole trust document. Many states have certain statutes that lay out the contents of the certification of trust. As long as your certificates meet all state requirements, different institutions have to accept it. Otherwise, it will be liable for any losses that occur.

If you need help with your certification of the trustee for a trust, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

How Can a Beneficiary Become Trustee in an Irrevocable Trust?

Generally speaking, the person creating the trust agreement, referred to as the grantor, can name a beneficiary as trustee. It is a popular estate planning tool that has a variety of potential uses. It can help you avoid probate court, provide for seamless estate administration, maximize estate tax planning opportunities, and manage assets for minors, people with special needs, or financially irresponsible beneficiaries.

How to act as a trustee

Individual state laws govern these, so it is important to understand any state-specific restrictions on trustees or beneficiaries.

Irrevocable Trust Basics

When you create one of these, you relinquish your rights to the property you place into it. In some cases, you can keep an income-only right to the assets, but you cannot have a reversionary right in it. The agreement identifies the person who manages the assets, referred to as the trustee, and may name one or more successors to act if the first-named individual dies, becomes incapacitated, or resigns.

These agreements also identify who has rights to receive distributions. These individuals are known n as the the beneficiaries. The agreements sometimes include distribution provisions designed to take effect at the grantor’s death, but they may instead provide for long-term asset management for beneficiaries.

Irrevocable trusts are sometimes useful in estate tax planning as a mechanism to remove assets from the grantor’s estate or to create liquidity outside the estate to pay estate taxes and other estate administration expenses. Grantors in some states use this type of tool as creditor-protection vehicles.

A key thing to remember is that, after creating and placing assets into it, you cannot change the terms of the agreement. Even if your wishes change about who should manage the trust or to whom and how distributions should transfer, you cannot legally make changes.

Considerations When Naming Trustees

A trust is an important document. Before drafting it:

  • Think carefully before naming the initial and successor trustees. You can name any competent adult. You can also name a professional, such as a corporate trust department or lawyer.
  • Regardless of whom you name, be sure the nominated trustee can carry out their duties. They must be impartial, act with integrity, and be capable of following the agreement’s provisions to the letter.
  • Consider also including removal provisions in your irrevocable agreement, establishing under which circumstances to remove a trustee and identifying who has the ability to do so.
  • While it is usually OK to name a beneficiary as the initial trustee or as a successor one, be aware that doing so could raise a potential conflict of interest. There are also potential tax considerations you should evaluate before making this decision.

Trust and estate laws can be rather complex for those not familiar with it. If you want to establish this type of agreement, understand how to create it, and determine who you want to act as trustee. This individual will manage your assets, so ensure that you choose someone you entrust, even if they are also a beneficiary too. Keep in mind, however, that this might cause some issues. Therefore, consider whether it makes the most sense to choose someone who will act as both a beneficiary and trustee.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.

Acting as an executor and/or trustee is a big job. If you have been appointed to act in either or both of these roles, it is important that you seek legal advice regarding the duties that accompany each of these roles and the options available to you should you want to later be discharged of such duties.

Executor vs. Trustee

While oftentimes the executor and trustee appointed under a Will is the same person or people, these are nonetheless different roles. An executor will administer the estate, which means his or her duties may include arranging the funeral and burial arrangements, obtaining a certificate of appointment (“probate”), paying the deceased’s debts and taxes, liquidating estate assets, and making distributions to beneficiaries among other tasks. While the executor generally holds the estate assets in trust until at the very least all debts and taxes of the deceased and estate have been paid, it may be the case that following the payment of debts and taxes all estate assets are to be distributed outright to a beneficiary or beneficiaries and the executor will have no further obligations to fulfill on behalf of the estate after making the final distributions.

In other cases, distributions to beneficiaries cannot be made outright and instead must be held in trust for an ongoing period of time. This is typically where the executor’s role either changes to one of a trustee (if it’s the same person), or the trustee takes over to manage the trust(s). Such trusts may be established where there are minor or disabled beneficiaries, or where the settlor (person settling a trust) or testator (person signing the Will) wants to protect a beneficiary that has creditors or has trouble managing money.

Careful Consideration must be given before Accepting or Assuming the role of Estate Executor and/or Trustee

It is relevant to understand the distinction between these two roles when considering what your options may be if you cannot continue to act in your capacity as an executor or trustee. Once you have started acting as an executor, it is not an easy process to be removed. To do so, you will need to apply to the court under section 37 of the Trustee Act (the “Act”). Accordingly, if you expect you may not be able to see this job through, you should carefully consider taking on this role in the first place. Even for simple estates, the process may take approximately one to two years. You should also understand that you do not need to formally accept your appointment as executor to assume this role. If you start completing jobs that are those of an executor, you could be deemed an executor de son tort, which essentially means that you will be considered to have accepted the role of executor through your actions regardless of your intentions. Thus it is important you get legal advice before completing any executor tasks to ensure you do not unintentionally end up taking on a job that you cannot simply remove yourself from.

Removing or Replacing a Trustee

Comparably, there are provisions in the Act that provide for how trustees can be removed and replaced, and the Will or other trust document can also make provisions for this. If you are a trustee but want to retire and/or be replaced, you should talk to a lawyer to confirm what your options are. Determining such options will require a careful review of the document establishing the trust (assuming there is one) and to the extent, such document does not provide for the circumstances at hand, an analysis of how the Act would apply to the facts of your case. This analysis will be informed by whether only one trustee or two or more trustees were originally appointed. If two trustees were originally appointed, there must continue to be two trustees or a trust corporation as trustee of the trust. Accordingly, if you are acting with another trustee and one trustee wants to step down, he or she cannot do so without a replacement to step in and meet the requirements of the Act. If both trustees originally appointed want to step down, typically the way to achieve this would be for one of the trustees to be replaced by two new trustees, and then the remaining original trustee would resign whereby the two new trustees would be the continuing trustees. Essentially, in some cases, a trustee can retire or be replaced rather simply in writing (through which the necessary parties simply sign off on the retirement or replacement), but in other cases, the Act will limit the trustees’ options for retiring and replacing trustees.

Retain Legal Advice Before Accepting or Assuming the Role of Executor or Trustee

Ultimately, being named in someone’s Will or other trust document as an executor or trustee does not mean you have to accept this role. It is important you get advice regarding the above before accepting or assuming either of these roles so that you can make an informed decision about acting. It is also important to seek legal advice if you have already started acting as an executor or trustee but want to resign so that you can ensure you are properly discharged from your office of executor or trustee. If you have questions in this regard and would like to talk to a lawyer in our estates group or if you are interested in learning about our estate trustee services, please reach out to us at 416-863-0125 or fill out the online form.

Meghan O’Neil

Meghan O’Neil joined Mills & Mills in 2016. Meghan graduated with honours from the University of Ottawa Faculty of Law in 2014. Prior to obtaining her law degree, Meghan graduated with a Graduate Certificate in Broadcast Journalism from Fanshawe College in 2009 and Honours Bachelor of Arts from the University of Windsor in 2010. Read More

A deed of trust is a type of trust instrument that transfers interest in real property. In Texas, a deed of trust is most commonly used to secure a loan for the purchase of a home or other real property until that loan is repaid and the trust is voided, similar to how mortgages are used in other states. It can also be used, however, as a more permanent part of a comprehensive estate plan. The trustee, the person or entity who owns and manages the property, must meet Texas’ legal requirements for trustees.

Parties to a Deed of Trust

There are three principal parties to a deed of trust: the trustee, settlor and beneficiary. The settlor, also known as the grantor or trustor, is the person or entity who owns the property being transferred to the trust. This is typically the purchaser or owner. The trustee is the person or entity who will hold legal title to the property after the transfer. The beneficiary or beneficiaries are those whom the trust is intended to benefit. In the case of a mortgage, this would be the lender. If the trust is used for estate planning, this would likely be the settlor, his heirs or other named persons, or some combination of both.

Requirements for Trustee

The trustee named in a Texas deed of trust can be any individual person who has the legal capacity to hold and transfer property. Under Texas law, if the named trustee is a corporation, the corporation must be authorized to act as a trustee in Texas. This includes chartered financial institutions, but not most general businesses incorporated under the Texas Business Corporation Act. This also includes nationally chartered banks, and certain financial institutions or corporations depending on the circumstances.

Beneficiary as Trustee

Unlike some states, Texas permits a trust beneficiary to serve as trustee. This is typically not an issue with mortgage-type deeds of trust. If, however, there is only one beneficiary and he is the sole trustee, the trust will fail. In other words, if the trust is created with a sole beneficiary as trustee, it is void and the settlor retains title to the property. If the trust is initially valid, but circumstances change such that the trustee becomes the sole beneficiary, the trust terminates automatically and the beneficiary then holds legal title to the property. An online legal document preparation service can assist you with properly executing your deed of trust or transferring title to your property.

Settlor as Trustee

Like many states, Texas permits the settlor of a trust to also serve as trustee. Again, this occurs in estate-planning situations, but usually not in mortgage-type trusts; instead, a neutral third party is typically appointed as trustee.

Decline to Serve as Trustee or Personal Representative

Decline to Serve as Trustee or Personal Representative

_________________________, who is entitled to act as the trustee or personal representative of the estate of _________________________, by virtue of ______________________, herewith declines to serve as trustee or personal representative.

______________________________________________
Proposed Trustee or Personal Representative

Decline to Serve as Trustee or Personal Representative
Review List

This review list is provided to inform you about this document and assist you in its preparation. It is a perilous task to act as a trustee or personal representative in this litigious age. For that reason alone, declining to serve in these positions makes a great deal of sense—unless you have a personal commitment to do so. You can modify this document to conform to other offices or positions you elect to decline to serve in.

1. Make multiple copies. Send one to each relevant party. Keep one in your personal files.
2. Be advised that even declining may cause you to have some legal liability should you be proven to know the “next” in line will cause harm to the parties you were appointed to serve.

No related documents.

You are here: Home » Estate » Decline to Serve as Trustee or Personal Representative

Many people may consider hiring a bank to act as a trustee instead of appointing a relative or friend to manage their financial affairs. A bank may have more experience managing property and would be more likely to manage the trust’s assets impartially and professionally. The downside of using a bank as a trustee is that it charges a fee for its service. Also, the creator of a trust may want someone with whom he has a personal connection to oversee the trust property.

Investigate the bank options available to you. Determine whether the bank you choose has a trust department that is capable of handling the demands of your trust. Also, research the reputation of the bank’s trust department.

Negotiate with the bank regarding the fees it will charge to be trustee. The fee a bank charges to serve as trustee is normally a percentage of the value of the assets in the trust. A bank generally charges 0.75 percent to 3 percent of the total asset value. A bank that charges higher fees may provide additional services, such as tax preparation.

Draft the Declaration of Trust. The declaration of trust document creates the operative trust and formalizes the relationship between the trustee and the trust. The declaration also defines when the trustee should distribute the trust’s assets and to whom. The declaration should also set out the fee that the bank charges for acting as trustee.

Transfer the trust property to the bank. The trustee holds the legal title of all the assets in the trust, for the trust’s benefit. Property law and the process for transferring property between parties, varies by state. Check your state’s laws for the proper process for transferring assets into the trust.

If no fee is mentioned in the trust documents, what would be a reasonable amount for a routine administration of the trust (percentage and/or amount)?

How to act as a trustee

Answer:

Trustees are entitled to “reasonable” compensation whether or not the trust explicitly provides for such. Typically, professional trustees, such as banks, trust companies, and some law firms, charge between 1.0% and 1.5% of trust assets per year, depending in part on the size of the trust. They charge a higher percentage for smaller trusts, typically under $1 million, and less for larger trusts, typically over $2 million, since the amount of work involved is more or less the same no matter the size of the trust.

In the past, professional trustees would often charge both a percentage of the trust principal and a percentage of the trust’s annual income, in part because trusts often provide that the income and principal beneficiaries are different. For instance, a trust might provide that all of the income be paid to a surviving spouse but that the principal be preserved to pass on to the children upon the spouse’s death. If the fee came solely from the trust principal, it would seem that the surviving spouse would be getting a free ride if the income stream would not share the expense. Nevertheless, with the decline in trust income in recent years due to chronically low interest rates, it has become customary to charge the fee only to trust principal.

While percentage fees are standard, this can be problematic for smaller trusts. A trust holding $200,000 and paying a fee of 1.5% would pay an annual fee of $3,000, which may or may not cover the trustee’s costs. Some professional trustees charge a minimum of $5,000 a year. In my own practice, where we end up being trustees of last resort for a number of smaller trusts—cases where there’s no appropriate person in the family to act as trustee and the trust is too small to engage a traditional bank or trust company—we charge our standard hourly rates for our work plus 0.5% per year. For a trust holding $200,000, for instance, this would entail an extra charge of $1,000 a year.

Fees are less standard when a non-professional acts as trustee, either on her own or in conjunction with a professional trustee. When the professional trustee is doing most of the heavy lifting, many non-professional trustees, who are often family members, take no fee. However, just as often, they do take a fee, especially if they are not directly related to the grantor, for instance if they are a niece or nephew. The standard I’ve seen is 0.25%, which on a trust holding $1 million would be $2,500 a year. When there’s no professional trustee acting, the non-professional trustee can certainly charge a higher fee and can use the professional standards as a guide. However, they should look at other trust costs. For instance, professional trustees usually take care of the investments as part of their function. If the trust is hiring an investment advisor, that cost should be considered in determining the trustee’s fee so that together they don’t get too high.

Survey Results:

A recent article published online by Wealth Advisor reports on a survey of the fees charged by national trust companies which are consistent with the information above. Annual fees range from 0.50% to 1.0% of trust assets up to $1 million with minimum fees ranging from $100 to $8,000, with most in the $3,000 range. For the most part, these fees seem not to include investment management, which would then be an additional cost. The trust company with the $8,000 minimum fee is undoubtedly trying to discourage smaller trusts from using its service.

To allow for equitable access to all users, SEC reserves the right to limit requests originating from undeclared automated tools. Your request has been identified as part of a network of automated tools outside of the acceptable policy and will be managed until action is taken to declare your traffic.

Please declare your traffic by updating your user agent to include company specific information.

For best practices on efficiently downloading information from SEC.gov, including the latest EDGAR filings, visit sec.gov/developer. You can also sign up for email updates on the SEC open data program, including best practices that make it more efficient to download data, and SEC.gov enhancements that may impact scripted downloading processes. For more information, contact [email protected]

For more information, please see the SEC’s Web Site Privacy and Security Policy. Thank you for your interest in the U.S. Securities and Exchange Commission.

Reference ID: 0.7ecef50.1634320862.2fac7d78

More Information

Internet Security Policy

By using this site, you are agreeing to security monitoring and auditing. For security purposes, and to ensure that the public service remains available to users, this government computer system employs programs to monitor network traffic to identify unauthorized attempts to upload or change information or to otherwise cause damage, including attempts to deny service to users.

Unauthorized attempts to upload information and/or change information on any portion of this site are strictly prohibited and are subject to prosecution under the Computer Fraud and Abuse Act of 1986 and the National Information Infrastructure Protection Act of 1996 (see Title 18 U.S.C. §§ 1001 and 1030).

To ensure our website performs well for all users, the SEC monitors the frequency of requests for SEC.gov content to ensure automated searches do not impact the ability of others to access SEC.gov content. We reserve the right to block IP addresses that submit excessive requests. Current guidelines limit users to a total of no more than 10 requests per second, regardless of the number of machines used to submit requests.

If a user or application submits more than 10 requests per second, further requests from the IP address(es) may be limited for a brief period. Once the rate of requests has dropped below the threshold for 10 minutes, the user may resume accessing content on SEC.gov. This SEC practice is designed to limit excessive automated searches on SEC.gov and is not intended or expected to impact individuals browsing the SEC.gov website.

Note that this policy may change as the SEC manages SEC.gov to ensure that the website performs efficiently and remains available to all users.

Note: We do not offer technical support for developing or debugging scripted downloading processes.