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Serving as a Trustee for a Trust: What You Need to Know Before Committing

Posted by Tammie Yearwood on Tue, Sep 5, 2017

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Serving as a Trustee for a Trust: What You Need to Know Before CommittingSo many moments in our lives we come to a fork in the road. Should I or shouldn’t I? Left or right?

One of these crossroads may be a decision of whether or not to be named a trustee of a trust. It is not a decision to be made lightly. Before you decide whether to take on both the honor and responsibility of being a trustee, there are several factors to take into consideration which may help you in making that decision.

estate planning questionnaireA trustee has many duties to fulfill in carrying out their fiduciary responsibilities. These include the following:

  • Conserve and safeguard assets by establishing possession and control of such assets
  • Make appropriate investment decisions under the Prudent Investor Act assuring both sufficient income for the current income beneficiaries and appropriate capital preservation and appreciation for the remainder beneficiaries
  • Manage non-standard trust assets such as commercial real estate closely-held business interests
  • Make mandatory distributions as required by the trust instrument and appropriate discretionary distribution decisions consistent with the purposes of the trust
  • Administer the trust in conformity with the terms of the governing instrument and applicable state laws under the Uniform Principal and Income Act
  • Prepare and provide to beneficiaries informative and accurate accountings of all transactions
  • Incur only costs that are reasonable in connection with trust administration
  • File tax returns and pay related income taxes

Understanding the trust document is one of the most important aspect of being a trustee. The trust document will state if distributions are mandatory or discretionary and to whom distributions can be paid. The trust document will also state what the fiduciary can and cannot do.

The trustee is held at a higher standard under the Prudent Investor Act and cannot be biased. There is a fiduciary responsibility to not only the current income beneficiaries but also to the remainder beneficiaries.

The world of trusts can indeed be complicated. Before taking on the role of trustee, be sure to not only understand your responsibilities, but also, the specific objectives the trust is designed to accomplish. In addition, not all trusts work the same.

There are many types of trusts, each with their own set of rules and nuances. Therefore, it would not be a bad idea to consult with an attorney or accountant before becoming a trustee. A little guidance can go a long way in carrying out your duties as a trustee effectively.

Our Estate & Trust Services team is led by Tammie L. Yearwood, CPA, who has more than 17 years of experience in estate services. Tammie’s areas of specialty are estate, trust and gift tax compliance, including estate and trust planning, fiduciary accounting, estate administration, and individual taxation. She is a CPA in Pennsylvania, New Jersey and New York.

Learn more about Tammie here or contact her at tyearwood@concannonmiller.com

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This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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