• February 3, 2018

The 3 Things Every Trustee Should Know

The 3 Things Every Trustee Should Know

The 3 Things Every Trustee Should Know 878 552 Patrick J. Thomas Agency

Trustees manage the distribution of a trust’s assets to certain beneficiaries. Since this responsibility comes with a substantial amount of financial management, certain accounting practices become necessary to effectively manage the distribution.

If you have recently become, or will become, a trustee, follow these best practices when executing your grantor’s trust.

#1: Understand the Powers the Trust Grants You

A trust is different than a conservatorship. Although trustees and conservators both act as fiduciaries to an estate, conservators are usually appointed by and derive their powers from the courts, while trustees are usually appointed by the grantor. However, trustees can also be appointed by the court or a trust document. However the trustee is appointed, his or her powers come from one place: the trust.

When you are appointed as a trustee, the most important thing you can initially do is carefully read the trust document. Almost everything you need to know about your duties and powers is contained within it, and you should refer to it whenever you need to. There are many different types of trusts. Some are open ended and can provide wide-ranging authority, while others may only give a very narrow focus of what can be done.

Always make sure you understand your authority, what distributions must be made from the trust assets, and the deadlines you have to meet. For more on the standards of practice for trustees in Minnesota, read this document.

#2: Bookkeeping is Essential

Since trustees deal with the management and distribution of financial assets, bookkeeping is absolutely essential. You must keep organized records of financial and investment statements as well as all tax-related documents. This is especially true for court-supervised trusts, as trustees must give a comprehensive accounting to the court every year.

A big mistake that trustees can make is assuming they are doing everything right. But the courts can catch issues during the accounting many years down the line, and not having an organized record of financial assets can further compound this problem.

#3 Secure a Surety Bond

In many states, trustees are required to post a surety bond before they are able to begin executing a trust. If this is the case in your state, it will be essential for you to seek out a court-approved surety to supply you with a bond based on the amount set by the court. This can be a slightly confusing process, but working with a reliable surety agency will make the process much easier. Surety bonds can provide much needed insurance to beneficiaries in the event the trust is not being managed properly.

To learn more about the surety bond process, contact The Patrick J. Thomas agency today.


Disclaimer: this is for informational purposes only and is not intended to be legal advice. If you need legal counsel, please contact an attorney directly.