PME Estate Planning, Trust, and Probate Blog

Welcome to the PME LAW Blogs. In this blog, we will focus on PME Estate Planning, Trust, and Probate Blog developments, particularly within the state of California. Nothing in this blog should be construed as legal advice. PMELAW.com is a public website, so communications are not privileged. Copyright Perkins, Mann & Everett (PME LAW) © 2015. All rights reserved.

Selecting a Trustee

Written by Curtis D. Rindlisbacker, Esq.

Choosing a trustee is fundamental to achieving your estate planning goals.

Who should you choose to serve as trustee? Understanding the duties of a trustee is helpful in selecting a trustee. This article will discuss in general terms the duties of a trustee.
A trustee has the following basic duties:

  1. Follow your instructions contained in the trust instrument.
  2. Keep beneficiaries informed about administration of trust.
  3. Prepare a complete inventory of all assets subject to the trust.
  4. Protect trust assets by acquiring and maintaining sufficient insurance.
  5. Obtain appraisals of all trust assets.
  6. Prudently invest trust assets to accomplish trust goals.
  7. Notify creditors about the administration of the trust.
  8. Approve or reject claims filed by creditors against trust assets.
  9. As necessary, sell trust assets to provide liquid funds to pay debts, taxes, administrative expenses, and make distributions.
  10. Prepare and file all required income tax returns, gift tax returns, and estate tax returns. Pay all required taxes.
  11. Pay all debts.
  12. Maintain accurate and detailed records of actions as trustee.
  13. Maintain accurate and detailed financial records and reports. Provide periodic accountings to beneficiaries of trust.
  14. Make distributions according to trust instrument and obtain receipts for all distributions.
  15. In addition to these basic duties, a trustee has several legal duties. The duty of loyalty means that they will administer the trust solely in the interest of the beneficiaries. The trustee has a duty to deal with beneficiaries impartially in investing and managing trust property. A trustee must avoid conflicts of interest by not using or dealing with trust property for the trustee’s own profit and by avoiding any transaction in which the trustee has an interest adverse to the beneficiary.

Serving as a trustee imposes serious duties and requires time and expertise. If the person you select to serve as trustee lacks sufficient expertise to fulfill the trustee’s responsibilities, then the trustee will need to hire professionals to assist the trustee such as attorneys, accountants, investment advisors, and others as needed. The trustee may use trust monies to pay for these professional services.

Family members who are also beneficiaries may serve as trustee but must be careful to avoid conflicts of interest and should obtain the written consent of other beneficiaries or approval from the court before taking any significant action that will affect the interests of other beneficiaries.

Banks and other institutional trustees, as well as private professional trustees, provide professional management of trust assets. They have the advantage of experience and expertise that family members may not possess.