Massachusetts Trustee's Responsibilities
A trust is a legal arrangement through which a person (trust settlor) appoints a person, or institution, ("trustee") to hold legal title to property for another person, called a "beneficiary." If you have been appointed as trustee of a trust, you have a major responsibility to both the trust settlor and the beneficiary. This is a brief overview of your duties and responsibilities:
As a trustee, you have a "fiduciary" role with respect to both the current beneficiaries of the trust and any future beneficiaries that come along after the current beneficiary dies (“remaindermen”). As a fiduciary, you will be held to a very high standard, meaning that you must pay even more attention to the trust investments and disbursements than you would for your own accounts.
The Trust's Terms.
The trust itself contains detailed instructions on when and how to distribute income and principal. It also contains terms that outlines the limits of your liability and when the trust can and should be dissolved. Therefore, it is important to read the trust carefully.
The terms of the trust will generally outline when trust income and principal can be distributed to beneficiaries. When the trustee has discretion, his decision to distribute should consider the beneficiary’s current need and potential future needs, the beneficiary’s other sources of income, and your responsibilities to other beneficiaries. And all of these considerations must be made in light of the size of the trust.
As a trustee, you have the ability to invest trust funds. Investments must be prudent, meaning that you cannot place money in speculative or risky investments. In addition, your investments must take into account the interests of both current and future beneficiaries.
One of the Trustee’s jobs is to keep track of all income, distributions, and expenditures made by the trust. Typically, a Trustee must give an account of this information to the beneficiaries on an annual basis. Moreover, if the trust permits, then the beneficiary may request an accounting at any time.
Depending on the type of trust, the trustee will have to file an annual tax return and may have to pay taxes (from trust funds). In many cases, the trust will act as a pass through with the income being taxed to the beneficiary. In any event, the Trustee should keep good records and turn this over to an accountant to prepare trust taxes.
Trustees are entitled to reasonable fees for their services. Determining what fee is reasonable can be difficult. Banks, trust companies, and law firms typically charge a percentage of the funds under management. Others may charge for their time. In general, what's reasonable depends on the work involved, the amount of funds in the trust, other expenses paid out by the trust, the professional experience of the trustee, and the overall expenses for administering the trust.