Philip M Hawes, Esq

Philip M Hawes
Attorney & Counselor

Estate Administration Fundamentals . . . .

What Trustees Should Know

As a Beneficiary, you should know enough about what Trustees they do to recognize when they are doing well, and when they are not. Don't expect your Trustee to know everything about the job. Communicate regularly to stay in sync with each other. Keep your Trustee accountable to you!

The Trustee’s Authority. When you accept the job as trustee, you are accepting legal ownership of the trust property which you will use to carry out the terms of the trust and the duties of your office. You do not need the consent of anyone else to carry out your duties, although you should consult with your Settlor(s) and ask the probate judge for guidance in situations where you cannot determine the proper course of conduct.

Although the trustee’s authority is not absolute, it is as broad as the terms of the trust and its assets require. A trustee will not be second-guessed by the persons and financial entities he encounters the the course of his job because those third parties will assume the trustee is acting as he ought.

This is may not always be a difficult job, but it is a huge responsibility. That’s why I think term “trust” is most suitable for this special relationship.

The Obligations of Power. Every Trustee has special responsibilities to you and to your beneficiaries that must be observed in doing the Trustee’s work. A trustee is the archetype of the fiduciary whose strict legal duties and responsibilities control how the trustee must go about his or her job.

Your agent under power of attorney and the executor or administrator of your estate also are fiduciaries and are held to fiduciary standards just like your trustee.

Fiduciaries are legally held to the highest duty of care and prudence in their actions. And they ought to be because you are turning over full legal control of your financial life into their trust. Let’s review the short list of “trustee must”s….

It is most important to remember when you step in as trustee is that these are not your assets. You are safeguarding them for others: first, for the Settlor (if living) and later for the Beneficiaries, who will receive them after the Settlor dies.

As a Trustee, you have certain responsibilities, such as:
• You must follow the instructions in the trust document.
• You cannot mix trust assets with your own. You must keep separate checking accounts and investments.
• You cannot use trust assets for your own benefit (unless the trust authorizes it).
• You must treat trust beneficiaries the same; you cannot favor one over another (unless the trust says you can).
• Trust assets must be invested prudently. The rule in California is that “a trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.” Trust investing is a balance of risk, growth and income.
• You are responsible for keeping accurate records, filing tax returns, and reporting information and accounting to the beneficiaries as the trust requires.