When you become a trustee, you take on a role of significant responsibility. Managing assets, following legal obligations, and making decisions in the best interest of beneficiaries are just some of the duties you must handle. But what exactly are the duties of a trustee? This blog will explore those responsibilities, explain fiduciary duties, and discuss when a trustee may need a lawyer.
1. What Is a Trustee?
A trustee is an individual or organization chosen to manage assets held in a trust. Trusts are commonly used in estate planning, real estate, and for managing family assets. The trustee’s primary job is to ensure that the assets are properly administered and distributed according to the terms laid out in the trust document. They must always act in the best interest of the beneficiaries, who are the individuals or entities that the trust is meant to benefit.
2. What Are the Fiduciary Duties of a Trustee?
The fiduciary duties of a trustee can be broken down into several key areas. These responsibilities require a high level of organization, communication, and a commitment to following legal guidelines. Here are the most important duties:
A. Duty to Administer the Trust in Good Faith
One of the most critical duties of a trustee is to administer the trust in good faith in accordance with the trust agreement. The trust agreement is a legal contract that directs how the assets in the trust should be managed and distributed. This may include paying out funds to beneficiaries at certain times, selling assets, managing real estate investments, or managing securities on behalf of the trust.
Trustees must strictly adhere to the instructions given in the trust. Failing to do so can result in legal consequences and disputes with the beneficiaries.
B. Duty of Impartiality
Pursuant to Section 736.0803, Florida Statutes, “If a trust has two or more beneficiaries, the trustee shall act impartially in administering trust property, giving due regard to the beneficiaries respective interests.” This means that a trustee must remain neutral and treat all beneficiaries fairly. If the trust names multiple beneficiaries, the trustee cannot favor one person over another unless the trust specifically instructs them to. For example, if the trust states that one beneficiary receives more money or assets than another, the trustee must follow those instructions. However, in situations where the trust does not provide clear guidance, the trustee must use good judgment to treat each beneficiary equally and without favoritism.
C. Duty to Manage and Invest Trust Assets Prudently
Under the prudent investor rule, encoded in section 518.11, Florida Statutes, Trustees have “a duty to invest and manage investment assets as a prudent investor would considering the purposes, terms, distribution requirements, and other circumstances of the trust.” Trustees are responsible for managing the assets in a way that protects their value. This may include investing trust funds, managing property, overseeing financial accounts, and engaging the services of a professional financial advisors. A trustee must use reasonable care and make educated decisions to ensure the assets grow or maintain their value over time.
D. Duty to Keep Beneficiaries Reasonably Informed and to Provide Annual Accountings
A trustee must keep the beneficiaries informed about the trust’s status and transactions. This includes providing updates on how the assets are being managed, any major financial decisions, and distributions made from the trust. Open communication builds trust between the trustee and beneficiaries and ensures everyone understands how the assets are being handled.
Under Florida law, trustees are required to provide at least an annual accounting of the trust, outlining the trust’s income, expenses, distributions, and current values. Keeping good records and being transparent with beneficiaries are important to fulfil this duty.
E. Duty of Loyalty
A trustee must act in the best interests of the beneficiaries and the trust at all times. This means they cannot make decisions that benefit themselves or another person at the expense of the trust or beneficiaries. For example, a trustee cannot use trust funds for personal gain or invest trust money in a business they own unless the trust specifically allows it.
3. Does a Trustee Need a Lawyer?
One common question is whether a trustee needs a lawyer to fulfill their duties. The answer is simple: Yes. The Florida Trust Code is complex and trustees are subject to personal liability for mishandling and failing to properly administer trusts. Hiring an attorney is always a smart choice, especially if the trust involves large amounts of money, property, or complicated legal issues.
Here are a few situations where a trustee may need legal help:
- Interpreting the trust document: Trust instruments are often written in complex legal language, making it difficult to understand what the trustee is required to do. A lawyer can help clarify these instructions.
- Managing complex assets: If the trust includes real estate, business interests, or valuable personal property, a lawyer can advise on the best way to manage or sell these assets.
- Handling disputes with beneficiaries: If there is a conflict between beneficiaries or if someone challenges the trustee’s decisions, having legal support can protect the trustee and help resolve the issue.
- Compliance with state laws: Each state has specific laws that govern the trust administration. A lawyer can ensure the trustee is following these laws and help avoid legal pitfalls.
Seeking legal advice can provide peace of mind and ensure the trust is being managed properly.
Being a trustee is a serious responsibility that comes with many duties. From trust interpretation to managing assets wisely and communicating with beneficiaries, a trustee must act with utmost care and loyalty. The fiduciary duties of a trustee are crucial, and in some cases, a trustee may need a lawyer to help navigate these responsibilities.
Understanding the duties of a trustee is the first step toward fulfilling this important role. By staying informed and seeking help when needed, trustees can successfully manage the trust and protect the interests of the beneficiaries.
For professional trust administration services in Jacksonville, contact us. Our team is ready to assist you with all aspects of trust management in compliance with Florida law.