As trusts become a more common estate planning tool, someone may ask you to be the trustee or successor trustee for their estate. Before accepting, it’s important to understand the basic responsibilities that accompany that role.
When someone agrees to become a trustee for assets held in a trust, they assume a duty to protect the best interests of the property. Failure to comply with this basic mandate constitutes a breach of fiduciary duty. Above all, a trustee must remember that assets held by the trust do not belong to them – rather the trustee is simply safeguarding them for the trust’s beneficiaries.
Bound by a duty
As noted, trustees are bound by a fiduciary duty to the beneficiaries of the trust. This means that a trustee cannot place their personal interests above the interests of the trust beneficiaries. Put plainly, a trustee cannot profit from the assets held in the trust or utilize trust property for personal gain if their actions adversely affect the beneficiaries. For example, it would be a breach of fiduciary duty for a trustee to sell trust property below full market value if they were to profit from sale proceeds and beneficiaries would not.
When investing trust assets or managing the trust estate, the trustee has a responsibility to act prudently. It is in your best interest to consider each transaction wisely before making a move. If your actions are called into question later, you cannot defend yourself by reasoning that you were acting in good faith.
In addition to asset management duties, the trustee must also provide the beneficiaries with information about the administration of the trust. Updated in 2013, the Wisconsin Trust Code clarifies what information the trustee must provide in regular updates. Required reporting includes:
- An annual inventory
- Accounting of trust administration
- Relevant receipts
- Information on any liabilities
Although these reporting requirements and overall responsibilities may seem tedious for the trustee, they help protect trust assets and beneficiaries. If a trustee fails to satisfy their fiduciary duties or provide accurate reporting, they can be held accountable. In cases where a trustee fails to properly administer the trust, the trustee can be removed, or the court can appoint a trust protector to supervise the trustee’s actions and intervene if necessary.