by Rebecca J. Sargent, Esq.
A Trustee holds legal title to property for a beneficiary. The Trustee must have a good knowledge of the trust document because it sets forth the terms under which the trust is to be administered. The Trustee is also governed by the Maine Uniform Trust Code and should be familiar with that law.
The following is a brief summary of the general duties of the Trustee:
The Trustee has a responsibility to both the current income and principal beneficiaries and any future beneficiaries (remaindermen) who are named to receive assets upon the death of those entitled to income or principal now.
Pursuant to the terms of the Maine Uniform Trust Code, the Trustee has a duty to inform and report to all qualified beneficiaries. Within 60 days of the acceptance of the trust by the Trustee, the Trustee must send a letter to each current beneficiary notifying them of the trust’s existence, the identity of the person who created the trust, give them a copy of the trust document and advise them they will receive annual accountings. The Trustee must also give a similar notice to the remaindermen as referenced above, but will advise them they have the right to request a copy of the trust and receive accountings.
A Trustee must collect and protect the assets of a trust. Assets should be in the name of the trust and properly insured in the name of the trust. Any investments must be invested prudently. According to the Maine Uniform Prudent Investor Act §901 of Title 18-B, a Trustee shall invest and manage trust assets, as a prudent investor would, by considering the purposes, terms, distribution requirements and other circumstances of the trust. In satisfying this standard, the Trustee shall exercise reasonable, care, skill and caution. In other words, though the Trustee does not have any prohibitions per se on types of assets, he/she must look at the entire portfolio and manage risk on behalf of the beneficiary(ies). The Trustee is held to a higher standard than if the Trustee were handling the Trustee’s own personal finances. The Trustee has an obligation not to self-deal and must administer the trust solely in the interests of the beneficiary. Self-dealing is the conduct of a trustee that consists of taking advantage of his or her position in a transaction and acting for his or her own interests rather than for the interests of the beneficiaries of the trust. It is a form of conflict of interest.
If the trust document gives the Trustee discretion as to whether or not to make distributions to a beneficiary, the Trustee needs to evaluate the beneficiary’s current needs, future needs, other sources of income, specific provisions of the trust, and the Trustee’s responsibilities to other beneficiaries if applicable. In making any decisions, the Trustee must evaluate the size of the trust and how long it may last. The Trustee must have the ability to say no and set limits on the use of the trust assets if appropriate.
The Trustee must keep track of all income to the trust and expenditures and distributions from the trust and account to the current beneficiaries. The Trustee must also account to the remaindermen beneficiaries referred to above, should they request a copy. Annual accountings or reports are recommended, to be accompanied with a notice that the beneficiary has one year from the receipt of the accounting or report to make an objection, in writing, to the Trustee.
The trust becomes a separate taxpayer, and the Trustee must apply for a new taxpayer identification number for the trust. The Trustee must file a fiduciary income tax return for the trust on a calendar year basis.
Even though the Trustee is the responsible party, the Trustee can hire professionals to assist with the administration of the trust, such as attorney, accountant and investment advisor, paying for these services from the assets of the trust. As Trustee, an individual is entitled to reasonable compensation for his or her services but cannot take a percentage of the trust assets. The Trustee should keep a log to include the date, duty performed and time spent on a task. If the Trustee hires outside professionals, such as an investment advisor, the Trustee’s fee should probably be reduced. A reasonable fee for a Trustee is based on the work involved, the professional experience of the Trustee and time incurred.
Serving as Trustee is an important duty and should be taken seriously. It is good practice to consult with an attorney from time to time to make sure the laws have not changed.
The information presented on this website is general in nature and not intended to be legal advice. No attorney-client relationship will exist with Jones, Kuriloff & Sargent, LLC unless we agree in writing after a personal consultation. Please contact us for a consultation on your particular situation.