Being a trustee is a big responsibility and if you do not perform your duties properly, you could be personally liable. That is why it’s important to hire the right people to guide you in this important role.
A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” If you have been appointed the trustee of a trust, this is a strong vote of confidence in your judgment.
A trustee’s duties include locating and protecting trust assets, investing assets prudently, distributing assets to beneficiaries, keeping track of income and expenditures, and filing taxes. As a trustee, you have a fiduciary duty to the beneficiaries of the trust, meaning that you always have an obligation to act in the best interest of the beneficiaries. It also means you will be held to a higher standard than if you were just dealing with your own finances. Understanding the fine line between acting in the best interest of the beneficiaries and your own interest can be tricky and a failure to adhere to a strict fiduciary standard can cause a trustee personal liability.
A trustee is usually entitled to hire an attorney (and other professionals like an accountant) to assist in trust administration. The attorney’s fees will be paid from the trust funds. While hiring an attorney will cost money, not having an attorney at all could cost a trustee much more if errors are made.
A trust can be administered without court involvement, but that does not mean that the administration is simple. There are many areas where problems can arise — for example, if assets are not invested properly, taxes are late, or if proper records are not kept. In Missouri, the Trustee must keep his or her beneficiaries reasonable informed so that the beneficiary has sufficient information to protect their interest. If something goes wrong during the administration of the trust, the trustee can be removed and held personally liable for any costs incurred or losses suffered. Even if a spouse is the trustee, he or she should still consult with an attorney. The liability is not just to the immediate beneficiary but can reach to the other more remote beneficiaries who have been damaged due to the neglect or willful conduct in failing to administer the trust properly.
Being a trustee is a huge responsibility that requires an understanding of the high duty owed to the beneficiaries who ultimately receive the trust property.