If someone in your family sets up a trust for the future and asks you to be the trustee, you may feel honored. It can be a huge compliment knowing that someone believes you to be responsible and trustworthy enough for such a position. However, you should consider the requirements, your own ability to fulfill them, and your personal goals and needs now and in the future before you say yes.
An estate planning attorney can provide information and guidance to help you make the right decisions when planning your own estate or setting up a trust. Keep reading for some information that can help you make the right decision if you’re being asked to take on a trustee role for someone else.
What Is a Trustee for a Trust?
“Trustee” is a general term that refers to anyone that manages or holds financial assets for another person or entity. For example, bankruptcy trustees hold cash and make debt payments for those in bankruptcy, and trustees of retirement plans manage funds and investments on behalf of plan holders. In the case of a trust someone has set up, the trustee is the person charged with managing the assets in the trust according to the parameters created for the trust. The person who created the trust is typically known as the grantor.
Who Can Become a Trustee in Minnesota
Almost any adult can legally be a trustee in Minnesota. That can include:
- A family member of the person setting up the trust
- A friend of the person or someone else they trust
- A finance professional, such as a CPA
- A legal professional, such as a lawyer
- A trust administration professional, which is someone who manages trusts for a living
What Responsibilities Does a Trustee Have?
While the specific details of a trust dictate some of the duties you might have as a trustee, there are some general responsibilities that every trustee must uphold:
- Protect the assets of the trust. The trustee is expected to protect the assets of the trust as best as possible. This means working to make the right decisions about investments when applicable and honoring the wishes of the grantor in how trust assets are treated.
- Disburse assets as required. Most trusts are set up with provisions for how assets should be distributed. For example, if a trust was set up to cover education expenses, the trustee may be tasked with paying tuition bills and reviewing requests for funds to ensure they’re being used for the right expenses.
- Act in the best interests of the trust beneficiaries. As a trustee, you are in a fiduciary relationship with the beneficiary of the trust. That means you are responsible for acting in their best interests within the parameters of the trust.
Trustees cannot use assets in a trust they are managing for their own personal gain. That doesn’t mean you can’t be compensated for your efforts, though. It is possible for a person setting up a trust to create a provision to pay the trustee for his or her work.
Things to Consider Before You Say Yes to Being a Trustee
It can be easy to get emotionally caught up in the moment and say “yes” to being a trustee for someone because you’re honored just to be asked. However, being a trustee is a big responsibility. It may be a good idea to say you need time to carefully consider the decision.
Some questions to ask before you agree to be a trustee for a family member include:
- What exactly is involved? Get some details about the potential trust and what efforts are expected of you. This helps you determine if you have the time and inclination to handle the job.
- How long will trustee duties last? Do you need to hold assets for a few years until children come of age, or are you being asked to administer a special needs trust for many years?
- Do you have the time? If you’re already at max capacity with your own life obligations, you may not have time to appropriately manage a trust.
- Do you have the right skills and personality? Trustees deal in financial matters, which can mean reading and acting on billing statements, legal documents, and other complex information. You may also need to be assertive as you protect the trust assets and the rights of the beneficiaries.
What Other Options Does Your Family Member Have?
Being a trustee can be a rewarding experience, but only if you have the right skills and time for the position. You should never feel like you’re the only option for your loved one. If you don’t feel this is the right choice for you, it’s likely not the right choice for them.
Take time to discuss your decision with your family member and remind them they have other options. That includes working with a lawyer that is experienced in trust administration. Sometimes, choosing a professional as a trustee works best because it allows an experienced third-party to handle financial matters and provides time for family members to support each other in different ways.
For more information about how we can help with estate planning or trust administration, contact the Stone Arch Law Office today.