You might be considering using a trust as part of your estate plan—or someone may have asked you to be the trustee for their estate. Before you make a final decision, make sure you understand what is required of trustees.
Ohio Revised Code Chapter 5808 governs trust administration: everything from the trustee’s duties and powers to what happens if the trust is terminated. Being a trustee is a big responsibility. They have a fiduciary duty to the beneficiaries. As you can imagine, any time someone is placed in charge of valuable assets, the possibility of embezzlement and stealing exists. Chapter 5808 codifies the trustee’s duties so that beneficiaries have legal recourse, should something go awry.
General Duties of a Trustee
The trustee acts as the legal owner of the asset. They’re responsible for managing the assets, filing taxes and distributing assets as necessary. In Ohio, they must also keep “adequate records of administration” and keep the beneficiaries informed as to the administration, distribution and status of the trust.
Trustees need to administer the trust according to its specific terms—which means that you should make it a point to read the trust documents in their entirety before you agree to be one. They may also need to invest part or all of the assets to foster growth, and make other decisions according to the trust documents. For example, some trustees have the discretionary authority to disburse payments, while others simply act as guardians of the assets for a certain period of time. One example of the latter case is a trust where funds are disbursed after the beneficiary reaches the age of majority.
Designating a Trustee
Designating a trustee is a serious matter. You should choose someone whom you trust to act in an ethical manner—but also someone who is able and willing to keep up with their duties as a trustee. For example, your accountant brother-in-law would be an excellent choice to manage a trust for your child’s college tuition. (In fact, if a trustee has special skills that would assist in managing the trust, they’re bound by Ohio law to use those special skills.)
To that end, try to avoid choosing someone who struggles with financial management or won’t communicate with the beneficiaries as needed. It will save a lot of grief—and possible litigation—down the line.
If you would like to learn more about establishing trusts, designating trustees or what trustee duties might entail, call Dworken & Bernstein.