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Trust Administration Duties
Duties of the Trustee
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A trustee is a person who was named by the creator of the Trust, sometimes called the Settlor, in a trust agreement to manage the assets owned by the Trust. The role of the trustee in Michigan is important because this person has a fiduciary obligation to manage and protect Trust assets for the benefit of the named beneficiaries.
The Settlor will often name him or herself as the initial Trustee of the trust. This means that while the Settlor is alive, he or she takes on all the duties and responsibilities of the Trustee. The Settlor then will appoint a Successor Trustee, which is the person or persons who will take over the role of Trustee upon the Settlor’s incapacity or death. Sometimes a Successor Trustee is also named as a beneficiary, but not always.
The Successor Trustee has many roles, but the main purpose is to carry out the Settlor’s intentions set forth in the trust agreement. Some of the specific duties of the Trustee are as follows:
- Locate and Identify Trust Assets – When the Successor Trustee takes over the role of Trustee of a trust, his or her first duty is to identify the assets that are owned by the Trust. This may require the Trustee to go through the Settlor’s paperwork and account statements. Also, sometimes the Settlor kept ownership of some assets in his or her own name and designated the trust as beneficiary. In these cases, the Trustee must work with the financial institution to transfer the assets into the name of the trust.
- Pay Expenses – Before the Trustee can distribute trust assets to the beneficiaries, he or she must ensure that all required expenses and debts of the Settlor have been paid.
- Invest Assets – Once the expenses have been paid, the Successor Trustee should invest the remaining property with the intention of preserving it for the beneficiaries depending on how long these assets will be held by the trust.
- Administer the Trust – The Trustee must distribute and administer trust property per the terms of the trust for the named beneficiaries.
- Act as Fiduciary – A fiduciary relationship refers to a relationship where one party puts special confidence, trust, and reliance on, and is influenced by, someone else. This other person has a fiduciary duty to act in the original party’s best interests. In the case of a trust, the Settlor has put confidence and reliance upon the Successor Trustee to act in the trust beneficiaries’ best interests. Unless the trust agreement allows otherwise, the Successor Trustee cannot personally benefit from decisions and actions he or she makes as Trustee to the detriment to the beneficiaries.
- Communicate with Beneficiaries: Michigan law requires certain information about the trust agreement and trust assets to be shared with the trust beneficiaries to ensure that there is transparency and proper administration of the trust. The Trustee must make sure these communications are being made, and that they are made in the proper time frame set forth by Michigan statute.
Often, a Successor Trustee has never served in this role before and may seek the advice of a trust and estate lawyer to identify their duties or explain how to proceed with their duties.
