What Is a Trustee and What Is Their Responsibilities?

A trustee manages property held in a trust and carries out the instructions established in the trust document. Depending on the trust, that could mean investing assets, paying expenses, making distributions to beneficiaries, keeping records and handling tax matters. Trustees also have fiduciary responsibilities, which can create legal consequences if they fail to properly administer the trust.

A financial advisor can help you consider how a trust and the assets it holds may fit into your broader estate and financial plan.

What Is a Trustee?

A trustee is often an individual – typically a lawyer, accountant or family member – responsible for administering the wishes of the grantor for the benefit of beneficiaries. The most common type of trustee is a successor trustee who is responsible for handling property and other assets within a revocable living trust in case 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 filing taxes for the trust and distributing assets according to the guidelines of the trust.

There are very few qualifications required to serve as a trustee. A grantor can appoint someone as 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?

Being a trustee might sound like a great honor, but in reality, it requires quite a bit of responsibility for whoever takes it on. A trustee must take their position very seriously as they have legal requirements to fulfill their responsibilities. These responsibilities span from financial duties to keeping proper records. Let’s take a closer look at the three most important responsibilities.

Fiduciary Duty

One of the most critical responsibilities of a trustee is fiduciary duty. A trustee must put the interests of the trust above all others. 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 commingle 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 to their own accounts.

Asset and Property Management

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 obligations. 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 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. That decision may even result in litigation if not properly documented.

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Trustee vs. Executor: What’s the Difference?

A trustee and an executor can both manage assets on behalf of other people, but their responsibilities generally apply to different parts of an estate plan. A trustee administers assets held in a trust according to the trust’s terms, while an executor generally administers a deceased person’s probate estate according to the will and applicable state law.

Here are some of the main differences between the two roles:

	Trustee	Executor
What they manage	Assets held in a trust	Assets that are part of a probate estate
Governing document	Trust document	Will
When the role begins	Depends on the trust’s terms	Generally after the person’s death and appointment through the probate process
How long the role can last	Potentially years or longer, depending on the trust	Generally until estate administration is completed
Common responsibilities	Managing trust assets, making distributions, keeping records and handling applicable tax matters	Identifying estate assets, paying debts and expenses, handling applicable tax matters and distributing property
Who benefits	Trust beneficiaries	Beneficiaries or heirs entitled to estate property
Court involvement	Depends on the circumstances and applicable law	Typically involves probate court

The same person can potentially serve as both trustee and executor. For example, a parent could name an adult child as executor of a will and successor trustee of a living trust. After the parent’s death, the child could therefore have two separate jobs: administering property that passes through probate as executor and managing property held by the trust as trustee.

The distinction matters because a will generally does not control property that is already held in a trust. Likewise, the executor does not automatically have authority over trust assets simply because they are administering the deceased person’s estate. The trustee remains responsible for administering trust property according to the trust document and applicable law.

How to Appoint a Trustee

You can appoint a trustee in several ways. Generally, the individual who develops the trust appoints the 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 is 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 want to interview corporate trustees. This could help them understand how corporate trustees work and how they could contribute to wealth preservation. Once appointed, that individual will be stated in the trust as the trustee. This document may also be known as the declaration of trust.

Bottom Line

A couple filling out estate planning documents.

A trustee is responsible for managing trust property according to the trust document and applicable law for the benefit of the trust’s beneficiaries. Depending on the trust, the job can include managing investments, making distributions, paying expenses, keeping records and handling tax matters. Because trustees also have fiduciary responsibilities, choosing someone with the time, judgment and appropriate experience to administer the trust can be an important part of creating an estate plan. A financial advisor can help you evaluate how assets placed in a trust may fit alongside your investments, beneficiary designations and other parts of your financial plan.

Tips for Estate Planning

If you’re ready to establish your own trust, consider enlisting a financial advisor with estate planning expertise to help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Whether you just retired or are just starting a family, it’s never too soon to start estate planning. One of the first steps in this process is creating a will and then updating it over time. Consider drafting a will so that your property, assets and family are protected in case of an emergency.