Most individuals chosen to serve as the trustee of a loved one’s trust understand that they have a specific set of duties to fulfill.
Together, these responsibilities make up the fiduciary duty. Trustees have a fiduciary duty to the beneficiaries to act in their best interests while honoring their loved one’s wishes. However, there are many more elements involved in this duty.
Here is a brief overview of these elements.
There are several duties within a fiduciary duty
Trustees must separate their own personal interests from their responsibilities to uphold their fiduciary duties. To do this, trustees must also fulfill the following duties:
- The duty of loyalty: This is the most critical aspect of any fiduciary duty. Trustees must always act in the best interests of all of the beneficiaries. This requires trustees to eliminate any possible conflicts of interest they might have so that they can, essentially, act out of loyalty to the beneficiary.
- The duty of prudence: A trustee’s duty of prudence and duty of care often go hand-in-hand. It is often beneficial for trustees to understand finances so that they can handle the trust in an organized and effective manner. That is because the duty of prudence often requires trustees to take great care to administer a trust with caution and skill to avoid errors. Generally, this means that trustees should use the same care as they would if they were managing their own property.
- The duty of impartiality: Many California individuals might list more than one beneficiary when they establish a trust. If this is the case, trustees cannot favor one beneficiary over another regardless of any personal history or feelings between the trustee and beneficiaries.
All of these duties relate to how trustees must protect the beneficiaries’ best interests and rights. However, they also have a duty to preserve the property held within the trust.
Protecting the property is also critical
The duty to protect the property essentially serves the best interests of the beneficiaries as well, since they will receive the assets from the trust.
There are a few different ways that trustees can preserve the property, including:
- Following the instructions in the trust and securing the assets
- Keeping detailed records of the assets held within the trust
- Recording any investments made with the assets, if indicated by the trust
- Seeking the advice of licensed tax professionals to ensure investments are handled to the best tax advantage for the trust beneficiaries prior to distribution
Fulfilling these duties is critical. They not only protect the beneficiaries and the property within the trust, but they also help trustees reduce their liability if legal challenges should arise.