What Is a Trustee?

For individuals considering a trust as part of their estate plan, one of the most important decisions you will make is choosing who will manage trust assets. This person is called a trustee, and understanding their role is essential whether you are creating a trust, naming a trustee, or have been asked to serve as a trustee yourself.

A trustee is an individual or entity responsible for managing trust assets on behalf of the trust beneficiaries. The role comes with significant legal implications and duties, and understanding them is critical to choosing a trustee and deciding whether you want to serve.

Key Takeaways

• A trust is a common estate planning tool that determines how property is managed and distributed. It is created by a trust-maker and managed by a trustee for the benefit of trust beneficiaries.
• A trustee has a fiduciary duty to manage trust assets according to the trust’s terms and in the best interests of the beneficiaries.
• A trustee’s duties are similar to those of an estate executor; however, a trustee’s duties can apply during the life and after the death of the trust-maker.
• A trust is a complex and powerful estate planning document. If you are considering a trust as part of your estate plan or have been asked to serve as a trustee, an experienced estate planning attorney can answer your questions and provide important legal advice.

What Is a Trust and How Does It Work?

Before the question “what is a trustee?” can be answered, it’s essential to understand how trusts work. A trust is a common estate planning tool that determines how property is distributed. There are three parties to a trust agreement:

• The trust-maker, also known as the settlor, grantor, or trustor, establishes and funds the trust and provides instructions for how trust assets are handled and distributed.
• The trustee is the person or institution the grantor names in the trust document to administer the trust. A trustee can be a trusted family member, a friend, an attorney, or an organization such as a financial institution or a law firm.
• Beneficiaries are the individuals or entities who the grantor specifies to receive the trust assets.

Various assets can be placed in a trust, such as cash, stocks, bonds, or bank accounts, as well as real estate, life insurance, retirement accounts, personal property, business interests, and digital assets.

Assets transferred to the trust become property of the trust. The grantor no longer owns them. The trustee manages and controls trust assets but does not own them. The trustee manages trust assets to benefit a third party (the beneficiary). Depending on how the trust is set up, the grantor may also be the trustee and can continue to manage and control the trust assets.

Duties and Responsibilities of a Trustee

When determining who you will name, it’s important to consider: what are a trustee’s duties? A trustee is a fiduciary who has a legal duty to manage trust assets for the benefit of the beneficiaries according to the trust’s terms. Their responsibilities include the following:

Investing Trust Assets

Managing trust assets to preserve and protect them is one of a trustee’s most fundamental duties. Nevada applies the “prudent investor rule” which means trustees must exercise reasonable care, skill, and caution when managing trust assets.

Managing When and How Beneficiaries Receive Assets

Trusts are flexible estate planning documents and may include detailed requirements about when and how to distribute trust assets. It is common to include restrictions on when a beneficiary may receive trust assets, such as when they reach a certain age or attain a specific educational or career milestone.

Preparing Records, Statements, and Returns

The trustee may be called upon to make tax decisions about trust assets, pay trust taxes and other expenses, and keep all relevant financial records throughout the life of the trust.

Communicating with Beneficiaries

A trustee may need to communicate with trust beneficiaries, including issuing statements and tax reports.

How Is a Trustee Different from an Estate Executor?

An estate executor is named in the deceased person’s Will and administers a person’s estate after death. The role of a trustee is similar to that of an estate executor; however, the executor applies only to the estate of a deceased person, whereas a trustee manages trust assets during the lifetime of the trust-maker and after their death.

The Importance of a Trustee

The importance of choosing a good trustee or successor trustee cannot be overstated. The trustee will carry out the grantor’s wishes after their passing or during a period of incapacity. The trustee also manages, preserves, and protects trust assets for the beneficiaries’ benefit.

The trustee must follow the trust terms and has a fiduciary duty to make sound financial decisions impartially and without favoritism. The trustee handles financial management decisions, including investments, income tracking, tax management, and oversight of complex assets.

Understanding Trustee Duties and Responsibilities in Nevada

A trustee has important responsibilities and must manage trust assets and carry out the grantor’s wishes. Choosing the right trustee and understanding what they will be asked to do is an important decision. If you are considering including a trust as part of your estate plan, are seeking advice on naming a trustee, or have been asked to serve as a trustee yourself, Nevada estate planning attorney Natalia Vander Laan can provide valuable legal advice to guide you through the process so you know what to expect.

Contact the Vander Laan Law Firm, LLC, for Comprehensive Estate Planning in Nevada

If you are wondering, “what is a trustee?” and “who should I name as my trustee?” Natalia Vander Laan can help. A skilled estate planning attorney who proudly serves clients from her offices in Minden and Carson City, Nevada, she works with individuals and families throughout Douglas County, Carson City, and Lyon County. Discover what makes her approach to estate planning unique, then call (775) 461-2897 or contact our law office today to schedule a free consultation to discuss your needs and how Natalia can assist you.