We usually talk about trusts from the point of view of the people establishing them, but there is another party with a huge role to play in the way the trust works. This party is known as the trustee, and their job is to administer the trust for the benefit of the named beneficiaries. In this post, we will discuss some of the responsibilities of a trustee in trust administration.
For the beneficiaries
A person who supplies the assets to set up a trust is variously known as the grantor, settlor or trustor. When establishing the trust, the grantor may name relatives, a charity or some other person or entity as the beneficiary. In living trusts — trusts that go into effect during the grantor’s lifetime — grantors may even choose themselves as the beneficiary.
The trustee has a fiduciary responsibility to manage the assets in the trust for the benefit of the beneficiaries, and disperse the assets according to the terms of the trust. For instance, if the grantor passes away while their daughter is still a young child, the trustee must manage the assets in the trust to keep them safe and generating interest until the time indicated by the trust itself. If the trust instructs the trustee to give the daughter all the assets when she turns 18, the trustee must do so.
Administering the trust, managing the assets
In a common scenario, the trust calls for the trustee to issue payments to the beneficiaries at regular intervals. For instance, it may instruct the trustee to issue checks to the beneficiaries twice a year, and to continue doing so until the trust expires.
In these cases, the trustee must protect the principal assets in the trust, and carefully invest them so that the trust generates enough income to continue making payments to the beneficiaries. They must also keep detailed records and issue regular accounting statements to the beneficiaries.
Because the trustee has a fiduciary responsibility to the beneficiaries, the trustee can be sued if they fail in their duties. Clearly, this is not a job to be taken lightly. Those who are considering establishing a trust should think carefully about choosing committed professionals to administer their trust.