An overview of the fiduciary duties required when serving as a trustee and how to avoid common pitfalls during administration.
Being named as a trustee is a significant honor, but it comes with profound legal responsibilities known as fiduciary duties. A trustee is legally obligated to act solely in the best interests of the trust’s beneficiaries and must adhere strictly to the terms outlined in the trust document.
Primary duties include the duty of loyalty, meaning the trustee cannot use trust assets for personal gain or engage in self-dealing. The trustee also has a duty of prudence, requiring them to manage trust assets carefully and make reasonable investment decisions. Furthermore, trustees must keep accurate records, provide regular accountings to beneficiaries, and handle tax filings for the trust.
Failure to properly execute these duties can result in the trustee being held personally liable for any losses incurred by the trust. Because trust administration can be complex and fraught with potential liabilities, trustees are strongly encouraged to seek professional legal and financial guidance to ensure compliance with state laws and the trust’s specific provisions.