Trustee Duties Annual Checklist

Being a Trustee is more than just a job. Trustees have a fiduciary duty to act in the best interests of the beneficiaries and carry out the terms of the Trust. Unfortunately, many times we come across Trustees who have no idea what their duties are and don’t carry them out. This leads to personal liability for the Trustees and possible diminution of the Trust’s assets. Here is what the Trustee should do in the first quarter of each year (or now if these steps have never been taken before).

Read the Trust Agreement.
Don’t rely on your memory. Read the trust document. Consider the beneficiaries’ life situations and if their ages or other factors call for trust distributions or changes to the terms of the trust.

Meet with each Beneficiary.
Meet with the beneficiaries or their guardians and review the trust terms. Find out what their current financial needs might be and what other sources of assets they have for those needs. Do you need to plan for college tuition, a wedding, a house purchase, a partial distribution when making investment decisions for the year?

Review the Trust Assets.
Meet with the financial advisor. How are the accounts doing? Should any changes be made due to market conditions or the beneficiaries’ needs? If the trust holds insurance order an in-force illustration and meet with the Grantor and insurance advisor to evaluate the ongoing health and need for the policy. Should the policy be changed in any way to continue to meet the trust’s goals?

Evaluate the Trust’s Advisors.
Consider the financial advisor, accountant, attorney and other professionals involved in the Trust. Are they meeting your expectations? Do you have questions that have cropped up and you should schedule a meeting?

Prepare an Accounting of the Prior Year Activities.
What were the assets at the start and end of the year? What income was earned? What expenses were paid? What distributions were made to beneficiaries?

Consider Income Tax Planning.
The Trust may be in a higher income tax bracket than the beneficiaries. Is there an opportunity in the first 65 days of the year to distribute income to the Trust beneficiaries so that they pay taxes on the income at a lower tax bracket? Is this opportunity consistent with the terms of the Trust?

Prepare a Trust Activity Report to the Beneficiaries.
Sending a report that disclosures certain Trust activities and contains statutory notice language can reduce the Trustee’s personal liability for the activity of the Trust during the year and cut off future claims.

Have Income Taxes Prepared.
If the Trust owns assets that generated more than $600 in income an income tax return must be filed by April 15. Support Gift Tax Returns. If the Grantor made a gift to the Trust in the prior year a Federal Gif Tax Return may be due by April 15. The Trustee may need to supply information for the Gift Tax Return to be prepared.

by Deirdre Wheatley-Liss Esq., Principal, Porzio Bromberg & Newman P.C