Trustee Duties

Below is a summary of the basic obligations of a successor trustee of a trust.

Note: Trust administration requires strict compliance with the trust terms and often analysis of complex tax requirements. If you are a successor trustee, we can help. It is important that you follow the advice of an experienced Trust Administration Attorney to avoid or reduce estate taxes or income taxes and to protect yourself against personal liability.

1. Show Loyalty Of All Trust Beneficiaries. Even if the successor trustee is himself a beneficiary, as trustee he has the duty of loyalty to all the other beneficiaries, including the remaindermen.

2. Deal Impartially With Beneficiaries. The successor trustee cannot favor the income beneficiary over the interests of the remainder beneficiaries.

3. Make The Trust Property Productive Of Income. This duty is violated if the successor trustee keeps large amounts in a checking account that does not pay interest and does not grow in value. There may be other trust assets which do not produce income, such as vacant land. If you are administering a trust that has or acquires unproductive assets, consult with us and we can advise you as to your options.

4. Invest Only In Prudent Investments pursuant to the Florida prudent investor rule, Florida Statute §518.11.

5. Account to Beneficiaries and Keep Beneficiaries Informed. Upon commencement of the trust administration, the successor trustee must inform all income and remainder beneficiaries of his acceptance of the trustee duties. If a beneficiary requests it, the successor trustee is required to provide that beneficiary with a complete copy of the trust document, including any amendments as well as relevant information about the assets of the trust and the particulars relating to administration. In addition, even without request, all beneficiaries must be provided with an annual statement of the accounts of the trust.

6. Keep Trust Assets Separate. The successor trustee must keep the assets of each trust separate and keep his personal assets separate from the trust assets. This requires separate bank accounts, brokerage accounts, and safe deposit boxes for trust assets. It is particularly important that you keep the assets of the Credit Shelter Trust (also known as the AB Trust or Bypass Trust) separate from all other assets, since these assets will pass tax-free at the death of the income beneficiary. If the successor comingles any other assets in with these assets (or even simply takes the assets out of the trust and mixes them with his personal assets), in addition to breaching fiduciary obligations, the successor trustee will have subjected these assets to taxation when he dies, whereas they would not have been subjected to tax otherwise.

7. Avoid Conflicts of Interest and Self Dealing. The successor trustee cannot buy assets from the trust or sell his personal assets to the trust. He cannot favor himself as a beneficiary at the expense of any other remainder or potential remainder beneficiary. He cannot make any distribution to anyone or any withdrawals from the trust unless specifically authorized by the trust to do so. Conflicts of interest and self-dealing is a very broad and ill-defined area. If you are a trustee and have any concern as to any specific action or situation, consult with our law firm.

8. Preserve the Trust Assets and Uphold The Trust. The successor trustee is liable if trust assets are lost, misplaced or destroyed because of inattention or negligence. The successor trustee should always be certain that all trust assets are appropriately insured.

9. File Tax Returns and Pay any Tax Due. Each trust has a tax year, which like the personal tax year, ends annually on December 31. The trust must have a taxpayer identification number and file a tax return no later than April 15 of the year following. The income tax return for the trust is Form 1041, the Fiduciary Income Tax Return.

10. Distribute Income. Income generally includes interest earned on bank accounts, CDs, bonds or mortgages, and dividends on stocks and mutual funds.

11. Handle Trust Expenses. The administration of the trust necessarily requires certain expenditures. Example of expenses include CPA fees, legal services, the cost of insurance or real estate taxes on real estate owned by the trust.

12. Delegate Investment Functions if Necessary. In many instances, individual trustees are not equipped to comply with their investment responsibilities. In these cases, investment professionals may be retained. The successor trustee is obligated to exercise reasonable care, judgment and caution in selecting an investment agent.

13. Good Record Keeping. Keeping accurate, up-to-date and comprehensive records is one of the most difficult jobs a successor trustee must perform. If the successor trustee becomes disabled or dies, another person must be able to seamlessly step into his shoes and understand the current status of trust matters.

Miami estate planning firm, Rarick & Bowden Gold, P.A., has assisted families and business persons for over 20 years. Our firm has worked with over 400 similar law firms located in states outside of Florida to represent their clients in legal matters concerning probate, Florida estate planning, and asset protection. To schedule a meeting with a Miami estate planning attorney call (305) 556-5209 or (954) 360-8242, or e-mail info@raricklaw.com. We look forward to meeting you!