A trustee's powers, granted by the trust document and law, center on managing, investing, and distributing trust assets for beneficiaries, including buying/selling property, paying expenses, hiring professionals (lawyers, accountants), insuring assets, and defending the trust, all while acting prudently and solely in the beneficiaries' best interest, with significant discretion but bound by the trust's terms.
Neither role is more powerful. Trustees manage trust assets with less Court oversight. Executors work under probate Court supervision, focusing on property within the probate estate. The legal authority of each role is determined by its respective document (trust or Will).
On the one hand, trustees do have a tremendous amount of power over the trust and its assets. In legal terms, they are referred to as the legal owner of the trust assets. They control, manage, and ultimately distribute the trust assets. Whereas the trust beneficiaries are merely the beneficial owners.
Power of delegation – a trustee is able to instruct professional advisers where necessary and appropriate. Power of insurance – a trustee has the power to insure any trust asset against damage. Power of advancement – a trustee has discretion to advance capital of the trust to a beneficiary.
For example, a trustee should not borrow funds from a trust or purchase assets from (or sell assets to) the trust, at least not without full disclosure and consent of the beneficiaries. The trustee's duty of loyalty also prevents a trustee from favoring one beneficiary (or class of beneficiaries) over another.
Trustees manage — but do not own — trust assets. While they typically have access to the trust bank account, they are not permitted to use its contents as they please.
“Reasonable” trustee fees are sometimes calculated as a percentage of the trust's assets on hand (e.g., 1% of the total assets on hand) or as an hourly rate depending upon the nature of the services provided.
The trustee holds the real legal power to manage and control trust assets, acting as the legal owner, but they have a strict fiduciary duty to follow the trust's written terms and act solely in the best interest of the beneficiaries, who hold the beneficial interest (the right to receive benefits). While the trustee has management power, beneficiaries have rights to information and can hold trustees accountable if they breach their duties, separating legal control from beneficial enjoyment.
The trustee must begin administering the trust promptly, but there is no strict deadline for transferring a house unless specified. Most distributions are expected to happen within a reasonable period, typically 12–18 months, unless the trust specifies otherwise or complex issues arise.
The first duties of a successor trustee are to find the trust document, tell the beneficiaries about the trust, make a list of the trust property, protect the trust property, and manage the trust property. These duties are essential to the proper administration of a trust.
The first in line for inheritance, when someone dies without a will (intestate), is typically the surviving spouse, followed by the deceased's children; if none, then the deceased's parents, then siblings, and then more distant relatives like grandparents or aunts/uncles, as determined by state laws (intestate succession).
Trustee shortcomings often involve breaches of fiduciary duty, such as mismanaging assets (poor investments, lack of maintenance), failing to account for funds, neglecting communication with beneficiaries, acting with self-interest (conflicts of interest), or causing delays in distributions, leading to potential personal liability, removal, and legal action, especially with insufficient understanding or a failure to follow the trust document diligently.
An executor cannot take everything from an estate's resources and are only entitled to executor's fees as compensation for their services, and their inheritance if they are also named as a beneficiary.
The "5 by 5 rule" (or "5 and 5 power") in trusts allows a beneficiary to withdraw the greater of $5,000 or 5% of the trust's annual fair market value, whichever is higher, without triggering significant tax consequences, offering flexibility while preserving the trust's long-term integrity for the grantor's original purpose. If unused, the right lapses, but repeated lapses can have tax implications, so it's a strategic clause for asset management and tax planning.
1% of assets is a good estimate, with a range from 0.5% to 1.5% with larger trusts typically paying lower, asset-based fees. In some cases, corporate trustees may also charge hourly fees for specific tasks, such as preparing tax filings, providing legal advice, or managing complex investments.
The beneficiary can get income from the trust straight away but cannot control the assets that provide the income. The beneficiary has to pay income tax on the money they receive.
WHO IS THE “RIGHT” TRUSTEE? A natural first inclination is to consider a family member or trusted friend who knows you and your philosophies and values well. Family or friends may personally know your beneficiaries and their needs.
Distribution Deadlines
Depending on the state, trustees generally have 12-18 months from a decedent's death to make final distributions. If a trustee misses this deadline, they could be personally liable for any interest or penalties incurred.
This includes when the trust is invalid for some reason or where the beneficiary has exercised undue influence over the settlor to benefit from the trust. If the trust deed or Will allows a beneficiary to be removed at some point, then a trustee can do this, provided that they comply with the terms of the document.