Serving as a Trustee?

Serving as a Trustee?

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The powers the grantor gives you, the trustee, in a trust instrument include the buying and selling of assets, determining distributions to the beneficiaries, and even the hiring and firing of advisors. Distributions to beneficiaries will include income distributions and principal distributions. Your powers as trustee enable you to determine what the beneficiaries receive from the trust and when, and give you the administrative powers ensure the smooth running of the trust.

Powers of a trustee: Buying and selling assets

You, as trustee, typically have the power under the trust instrument to buy and sell assets (except for any unusual asset the grantor wants retained in the trust). Aside from any other specific directions in the trust instrument or state law, you must follow the prudent man rule — that is, to act as a prudent person would in managing their own affairs. In addition, most states have a legal list of investments that are suitable for trusts.

Powers of a trustee: Determining distributions to beneficiaries

The grantor can determine the frequency and amount of the distributions to the beneficiaries in the terms of the trust, or he or she can leave it to your discretion as trustee. If the grantor leaves it to your discretion, your job includes observing any guidelines in the trust instrument and adhering to the overall intent of the grantor.

Some of the types of distributions you may need to make as a trustee include income distributions and principal distributions.

Making income distributions as a trustee

Frequently, trust instruments direct that all income is to be distributed at least quarterly. Alternatively, income distributions may be made at other specified intervals, or at your discretion.

Very often, the distribution schedule is based on the age of the beneficiary so that younger beneficiaries often only receive discretionary distributions (great for paying college tuition while still keeping financial aid options open) , and older beneficiaries may become entitled to mandatory income distributions.

No two trusts are the same, so read the instrument upon your appointment, and reread it periodically to be certain that you're still following the guidelines.

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