May 04, 2021
The Role of a Trustee | Responsibilities of a Trustee
Would you want to be a Trustee in your family?
Learn the responsibilities of a Trustee in this episode of Daily Wisdom with Attorney and Financial Advisor Chris Berry!
Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.
Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.
Castle Wealth Group helps families with their legal, financial, and tax planning for their retirement and legacy.
With the use of legal structures like revocable living trusts, Castle Trusts (asset protection trusts), Chris Berry and Castle Wealth Group can help your family plan, protect, and preserve what is important through their Retirement and Legacy Blueprint Process.
What Does it Mean to be Named a Trustee?
Hey, this is Chris Berry with Castle Wealth Group. And today, we’re going to talk about the responsibilities of a trustee. And if you like this information, please make sure to subscribe to the YouTube channel and comment down below.
Christopher Berry is a leading estate attorney and advisor in the area of retirement and legacy planning. He has been featured in publications such as Forbes, Kiplinger’s, Crain’s Detroit, and more. He’s the host of the weekly radio show and podcast, The Chris Berry Show. He’s a national thought leader as it relates to retirement and legacy planning, and has authored the Amazon bestselling book, The Caregiver’s Legal Guide.
So you’ve been named as a trustee of a trust or a personal representative. What does that mean? Well, it means you have responsibilities now. And it’s kind of funny, having done this for over 15 years I see a lot of families and kids trying to fight to be named as a trustee, or named as a personal representative. Well, if I was in that position, I’d be fighting to be not named. I just want to be a beneficiary. I just want to sit back and say, “Hey, where’s my money? Wrap this up, come on. Let’s go. Where’s my check?” Right? When you sign up as a trustee or when you’ve been appointed a trustee or personal representative, understand you are taking on more responsibilities, whether you like it or not. Now you can choose whether you want to be the trustee or not. You don’t have to serve if you’re named, but it is a responsibility.
Trustee Versus Personal Representative Versus Executor
And let’s talk about the definition and the confusion between trustee versus personal representative versus executor. So it all boils down to the document that we’re referring to. If we’re talking about a trust, then the word for the person managing the trust is a trustee. Now, when you set up a trust, there’s three main roles. There’s what’s called a grantor or settlor, the person that created the trust. They’re the person that can make changes to the trust. Then we have the beneficiary who receives benefit of the assets in the trust. And then we have the role of the trustee, the person that manages the assets in the trust for the beneficiaries. So typically, when you set up a trust, you’re going to serve all three roles. You’re going to be the trustee. You are going to be the initial beneficiary. And you’re, of course, the grantor. You’re the person that created the trust.
But then let’s say you pass away. Now someone else will be named as the beneficiary and that same person or someone else can be named as a trustee to wrap up your final affairs to distribute assets where they’re supposed to go. Now, the advantage of the trust is that it avoids probate. That’s why a lot of people look for a trust as the focal point in that estate plan. But also you can have a will. And if you have a trust, you still have what’s called a pour-over will, where if any assets do end up in probate, the will knocks them over, pours them over into the trust.
Now the role of who wraps up things with a will is called an executor. Or in Michigan, the technical term is personal representative. Now understand, the personal representative or executor, their sole responsibility is wrap up the affairs in probate court. And if you have a trust, a lot of times you’ll name the same person as personal representative as well as trustee with the idea that hopefully nothing ends up in probate, but if it does, the will will knock it into the trust so it follows the distribution plan of the trust.
And then also the will becomes important because the will would appoint guardianship if you have minor children. But also the will, when you appoint the personal representative, that’s the person that is in charge that the funeral home will work with to put together any funeral plans. So typically, you’ll have a trust-based estate plan, or you have a will-based estate plan. If you do have a trust, the trust is the focal point but you still would have that pour-over will.
Following the Terms
So if you are named as a successor trustee, what do you need to do? What are your responsibilities? First and most important, you owe a fiduciary duty on behalf of the person who’s appointed you to act as a fiduciary for the trust and for the beneficiaries named in the trust. So it’s basically don’t do anything stupid. Don’t take the money and put it all on black for the beneficiaries as an investment strategy. You have to file out what’s called a prudent investor rule.
So typically, the role of the trustee or personal representative is first to wrap up the final affairs of the grantor, of the person that created the trust. So pay off any bills, work with a funeral home, and then do an inventory. So get a list of the assets in the trust. Work with the different financial institutions to get access and control of those accounts, utilizing things like certificate of trust and death certificate.
But once we have that inventory and we’ve paid off any final expenses, then we have to follow the terms of the trust and distribute the assets wherever they’re supposed to go. Now, the trustee can’t determine where the assets go. The trustee has to follow the terms of the trust. So the trust is the rule book and the trustee follows the terms of the rule book. So big picture, it’s work with the funeral home, which will get the death certificates. Pay off any final expenses. Do an inventory. Gather up a list of the assets. Handle the estate administration process. And then once we’re confident that everything’s wrapped up, maybe do an accounting and distribute the assets to the named beneficiaries. Typically, this takes a couple months. If there’s real estate, it might take more time. But either wa,y if we’re relying on a trust, typically it’s going to be much easier than relying on probate. And remember, all that a will does is gives instructions to probate court on how to administer the estate. If you want to avoid probate, typically you’re going to want to rely on a trust.
So hopefully that was helpful, helping you understand the differences between trustee, personal representative, executor, understand the difference between a trust, and a will, and outlining big picture, what are the responsibilities of that trustee. And if you reach out to our firm, just go to our website, castlewealthlegal.com. You can contact us. You can request a copy of our successor trustee checklist. So this has been Chris Berry with Castle Wealth Group. Thank you so much. Take care, and make sure to subscribe to our YouTube channel and also comment down below. Give us a thumbs up if you like what you heard today. Thank you so much.
Castle Wealth Group has clients across the nation and helps them plan, protect, and preserve what is important by creating a retirement and legacy blueprint.