Their fiduciary duty involves managing trust assets, making sound financial decisions, and adhering to legal and ethical responsibilities, which are crucial for the trust's success and the beneficiaries' well-being.
Pros of Serving as an Executor or Trustee
This can provide a sense of personal satisfaction and honor, knowing that you are contributing to their legacy. By efficiently and fairly administering the estate, you can help to maintain harmony among surviving family members and reduce the potential for disputes.
Being a trustee is a legal responsibility, and you might be worried about what happens if you do something wrong. All you have to do is act in the best interests of the person the trust is for. This is called your 'fiduciary duty'. If you don't, you can be taken to court – and the penalties can be severe.
A trustee can end up having to pay taxes out of their own personal funds if they fail to take action on behalf of the estate in a timely way. Of course, they can also face criminal liability for such crimes as taking money out of a trust to pay for their own kids' college tuition. Yup, that's stealing.
Many trustees do, and it's certainly appropriate to be paid for the real work that comes with serving as a trustee. Handling other people's money is a serious responsibility. There are, however, some circumstances in which you might want to choose to forgo compensation.
Trustees can be held personally liable for any harm caused by their actions or inactions, leading to costly legal fees to defend themselves and potentially to pay other parties legal fees. Reputational Risks: As its name states, being a trustee means having been invested with a high level of trust.
Experience and Knowledge. Another key consideration is whether the individual or entity is qualified to act as trustee. If the trust has substantial assets, an individual with experience managing significant assets or with a background in finance or investments may be better suited to the role of trustee.
Reasons for removing a trustee
They may reach the end of their term of office. They may choose to step down. Their circumstances may change in a way which stops them from continuing their role.
Ultimately, trustees can only withdraw money from a trust account for specific expenses within certain limitations. Their duties require them to comply with the grantor's wishes. If they breach their fiduciary duties, they will be removed as the trustee and face a surcharge for compensatory damages.
First things first, you need to inform the beneficiaries about the trust administration process. California law requires that you send a formal notice to all beneficiaries and heirs, as per Probate Code Section 16061.7. This notice should include: The identity of the settlor(s) and the date of the trust.
The California probate code outlines the responsibilities of trustees in managing and fairly distributing assets to beneficiaries. Typically, a revocable trust with clear provisions for outright distribution might conclude within 12 to 18 months.
Banks, trust companies, and individual professionals (e.g., attorneys and accountants) frequently serve as trustees and are chosen because of their expertise with respect to trust administration and knowledge about the rules governing trusts and trustees.
While trustees may temporarily be able to delay trust distributions if a valid reason exists for them doing so, they are rarely entitled to hold trust assets indefinitely or refuse beneficiaries the gifts they were left through the trust.
It is not unusual for the successor trustee of a trust to also be a beneficiary of the same trust. This is because settlors often name trusted family members or friends to both manage their trust and inherit from it.
Trustees hold legal powers such as managing assets, making investment decisions, distributing funds to beneficiaries, and ensuring compliance with trust terms and laws.
From a legal standpoint, you can appoint yourself as the Trustee of any trust you create, whether it is a revocable or irrevocable trust. Appointing yourself as the Trustee of an irrevocable trust in which you are also the Settlor, however, would almost always defeat the purpose of making the trust irrevocable.
However, you should be aware of some downsides to naming a beneficiary as the trustee. Making one of the beneficiaries the trustee can potentially create conflict with the other beneficiaries. The other beneficiaries may wonder why they were not selected as trustee and may resent the beneficiary who was selected.
Anyone 16 and over (18 for an Unincorporated Association or Charitable Trust) who is not 'disqualified' can be a Trustee. The reasons for disqualification were set down by the Charities Act 2011, and were designed to prevent people convicted of financial crimes, or who made serious financial errors, becoming trustees.
Being a trustee is also a role that can be quite time consuming, more so than most people assume. Depending on the nature of the estate, being a trustee can require quite a few hours, which can be hard to come by if the trustee also has a full-time job, a family, and/or other obligations.
The trustee generally has the authority to withdraw money from a trust to cover the cost of third-party professionals, as well as any other expenses arising as a result of administration.
A Trustee will administer a Trust, handling the assets inside the Trust and distributing or managing them as the Trust directs. An Executor, on the other hand, oversees and manages an estate by distributing a deceased person's assets as directed by a Will.
For instance, trustee fees are deductible in full because these fees are by definition incurred only when assets are held in trust.