If you are the beneficiary of a trust, you should know everything that a trustee can and should be doing for you.
First, a trustee should be handling asset collection and protection.
What this means is that the trustee should be collecting assets that are earmarked for the trust. Trustees must also protect your trust’s assets. In real estate trusts, the trustee is responsible for the maintenance and upkeep of real estate properties, which are the trust’s assets in this situation. In financial trusts, the trustee is responsible for the maintenance and upkeep of financial assets like securities or cash, and is trusted to grow or safeguard these accounts for the benefit of the beneficiary.
Second, trustees are responsible for carrying out the terms of the trust.
If a trustee does not act in agreement with the terms of the trust, they are considered to be in breach of the trust. Only a beneficiary or a court with a written document can approve a trustee to act in a way that isn’t in accordance with the terms of the trust.
Third, a trustee must provide investment oversight.
This means that the trustee must have an investment plan in place that is designed with the best interests of the beneficiary in mind. Trust investments are usually expected to provide income for beneficiaries. They are also usually planned to reinvest the principal or distribute it to beneficiaries.
Trustees must be loyal to beneficiaries and not delegate their responsibilities. They must also not profit off the assets of the trust. However, they can charge fees for their services or receive income as outlined in the terms of the trust. To avoid possible problems, trustees cannot be in a conflict of interest with the trust or beneficiary.
Fourth, trustees are required to make sure taxes are paid on all income the trust assets generate.
This includes the tax on capital gains. Trustees also are required to tell beneficiaries the amounts that must be reported on their individual income tax returns as part of trust distributions.
Fifth, trustees must also document all transactions within trust accounts.
Before final settlement, they must also prove to their beneficiaries that all of the trust’s assets have been properly managed and distributed at the trust’s conclusion. This is usually done by providing the beneficiaries with a trust or court accounting which gives the beneficiaries the beginning assets, details of all income, all disbursements, and any distributions to beneficiaries. The last schedules of the accounting gives information on the ending balances of the assets and shows the changes during the period affecting each asset.
Sixth and perhaps most importantly, trustees are responsible for defending the trust and acting in ways that protect the assets.
If there is more than one beneficiary, the trustee must act impartially to their needs. That means that the trustee can’t favor one beneficiary over another but instead needs to act in the best interest of them as a collective group. Trustees are answerable to their beneficiaries and must keep them informed of their actions and decisions and also inform them of any developing situations related to the trust.
Your trustee should be someone you trust and recognize. They also should be a person that is experienced, with knowledge and skills needed to manage a trust. Since trust tax returns are different from individual returns, a qualified CPA is invaluable. Their knowledge and team will help your trust and beneficiaries get the proper financial management.
By MARCIA CAMPBELL | Contributing columnist with THE PRESS ENTERPRISE
PUBLISHED: December 1, 2018
Marcia L. Campbell has worked as a CPA for over 25 years specializing in seniors, trusts, estates, court accountings, and probate litigation support. You can reach her at Marcia@MCampbellCPA.com