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Estate Planning: Executors, executrix and personal representatives
Estate planning

Estate Planning: Executors, executrix and personal representatives

Q: I have been asked to be trustee of a friend’s trust. I’ve never done anything like this before. What will I have to do and is there anything I should know first?

A: A trustee is a fiduciary which, essentially, is a person that owes a legal, ethical and, perhaps, moral obligation to act in the interest of another. The fiduciary must put the needs of the person that is owed the duty above his or her own.

In the case of a trustee, the trustee owes a duty to the beneficiary. What that duty is depends on the terms of the trust.

Without knowing what the trust says, it’s difficult to say what your duties will be as trustee. Every trust is different.

The key to determining what you need to do is understanding what the trust says. Trusts can be long and complicated documents. They can also be convoluted and confusing. That’s why it’s important to get help if you’re not sure what to do. The assistance of an attorney can prove to be invaluable.

Once you know what the trust says, just carry out its terms. If the trust is your “run of the mill” revocable living trust used for probate avoidance, your duties are likely to be similar to those of a personal representative. You marshal the assets, pay the creditors, file the tax returns and pay the money out. Easy peasy.

Things become a little more complicated if your duties are administering a trust for the benefit of someone. If you are taking care of money for the benefit of another, you need to be extra careful. Make sure that you understand exactly what the terms of the trust are and follow them exactly. Don’t vary from the terms because you know what your friend "really wanted." Those words mean things. If you follow them, you are protected.

Understand what your investment duties are. If the trust is fairly long term, get investment advice. Don’t wing it because that could bite you in the butt. Your investment duties could be spelled out or subject to something like the Prudent Investor Act.

Also, if you have discretion, document your decisions. If the trust says you can distribute principal based upon the need of the beneficiary, document why you did or didn’t make the distribution. Make sure your decisions are based upon sound reasoning. Don’t pay out the money simply because they asked for it.

Being asked to serve as a trustee is an honor. It says that the grantor trusts and thinks highly of you. Just follow the terms and don’t be afraid to seek advice and you will be fine.

Christopher W. Yugo is an attorney in Crown Point. Chris’ Estate Planning Article appears online every Sunday at Address questions to Chris in care of The Times, 601 W. 45th Ave., Munster, IN 46321 or to Chris’ information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant, or estate-planning specialist.


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