To administer an estate or trust, a fiduciary or trustee must act with the highest regard for the estate, trust, and the interests of the beneficiaries they are appointed to protect. What does that mean if you are appointed a trustee?
Just as an executor is appointed in Surrogate’s Court to safeguard and settle the interests of the estate of a deceased person, a trustee is charged with managing a trust in the best interests of the parties named as beneficiaries.
Trust administration and fiduciary obligations
There are different types of trusts that address different legal and financial needs. The terms of a trust agreement dictate how the trust will be managed, what type of distributions will be made, and what, if any, discretion the trustee has in administering the trust.
In their fiduciary capacity, the types of tasks for which a trustee is responsible include:
- Manage the assets of a trust: Because a trust is created to protect and provide value, it is a good idea to name a trustee who is knowledgeable with trust administration and the type of value held by the trust. As administrator, the trustee should not have a personal interest in the value held by the trust. If a trustee has a financial interest, it could create a conflict between their fiduciary obligations and their role as a beneficiary of the trust. A trustee makes distributions, pays taxes, and maintains accurate financial records on behalf of the trust.
- Communication: In the course of their duties, a trustee ensures beneficiaries are provided accountings, informed of changes in the trust and distributions, and kept current on the handling of the account and payments made to the trustee.
- Ensuring value of trust assets: Whether it is real estate, musical recordings, or valuable objects, the trustee must maintain and preferably grow the value of the trust holdings. This may mean retaining specialists to maintain and manage those assets in accordance with the terms of the trust.
Because of the likelihood of claims of trust mismanagement, it is important for a trustee to consider retaining an attorney experienced with trust and estate administration. In New York, a trust attorney provides guidance and counsel to help the trustee avoid legal challenges by beneficiaries and others. Some of the grounds on which challenges occur include:
- Mixing of funds, or commingling funds between trust accounts
- Making improper distributions
- Failing to maintain and communicate accurate accountings
- Taking a financial interest in the trust (self-dealing)
If appointed as a trustee, be sure to retain experienced legal counsel to provide guidance for protecting the trust and guard against personal liability.
Speak with an experienced trust administration attorney serving clients in New Jersey and New York
Located in midtown Manhattan, Lissner & Lissner LLP has been providing exceptional legal counsel to executors and trustees for more than 65 years. Contact us or call (212) 307-1499 when you have questions about estate planning, administration, or litigation.