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What am I Really Asking My Trustee to Do?

Troy Kuhn, CAIA, MBA, CFP®

Director of Financial Education

Last Updated
December 01, 2020

Why You May Want to Consider Appointing a Corporate Trustee

Trusts don’t administer themselves. Once you’ve decided what you want your financial legacy to look like, you must name a successor trustee. This person will use your trust document as a guide to carry out your wishes after you’re gone. Your successor trustee’s responsibilities may include an appraisal and/or sale of your real estate, preparing personal and fiduciary tax returns, paying bills, contacting beneficiaries, closing credit cards and other lines of credit, and much more, all while complying with various legal requirements.

If you name a family member or close friend as successor trustee, he or she will need to step into this very complex role right after losing you, a close loved one. This person will also be in the middle of all of your beneficiaries and any disputes or hard feelings that arise.

In addition, your chosen trustee will be responsible for the various duties imposed on trustees by law. These duties include:

  • Duty to Administer the Trust by its Terms
  • Duty of Skill and Care
  • Duty to Give Proper Notice
  • Duty to Communicate
  • Duty to Account
  • Duty of Loyalty and Impartiality
  • Duty to Invest Prudently
  • Duty Not to Commingle Funds
  • Duty to Pay, Enforce and Defend Claims
  • Duty of Confidentiality
  • Duty Not to Delegate

Regardless of who you name as your successor trustee, that person or entity has a fiduciary duty to your beneficiaries to administer the trust. If a trustee fails to fulfill any of the duties, he or she can be held personally liable for damages.

For example, if a trustee makes an inappropriate investment that doesn’t pan out or a distribution that isn’t authorized, even if the actions were well-intentioned, he or she may be required to reimburse the trust for the full amount from his/her personal assets. Worse, if the person you name doesn’t have that money, your beneficiaries, the people you intended to take care of after you die, are left holding the short end of the stick.

If that’s not a burden you want your loved ones to bear, consider naming a corporate trustee. Corporate trustees are in the business of administering trusts and estates and are regulated by external agencies and internal auditors to help ensure they are meeting the obligations of the trust. A corporate trustee serves as a neutral third-party and can therefore administer the trust in an unbiased manner.

At Creative Planning, we offer corporate trustee services through our trust company. Our trust officers specialize in administering trusts and carry out all necessary duties, so your loved ones don’t have to shoulder this burden. And, these trust professionals work alongside your advisory team to help ensure all aspects of your financial life are properly tended to following your death. If you are interested in updating your estate plan to name Creative Planning Trust Company as your successor trustee, or if you’d like to begin the process of drafting your estate planning documents, please contact us.

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This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

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