The Job of the Trustee in a Revocable Life Trust

The job of the trustee involves responsibility for safeguarding and investing the assets in the trust and making payment as directed (or if given discretion, as appropriate under the guidance provided in the trust) to the named beneficiaries. This responsibility may run for as short as a few years or for generations.

Any natural person with the legal capacity to take and hold title to the property and deal with it or any corporation authorized by its charter or articles of incorporation to act as trustee and which meets relevant state law requirements can be named as trustee. Unincorporated associations or partnerships cannot be trustees since they are not separate legal entities.

Although legally, there is no limit to the number of trustees, most clients select one, two (often a corporate trustee and an individual), or three (to avoid a voting tie). In some states, individuals and nonbank corporations serve as professional trustees. When more than one party is named, each is a co-trustee and all make decisions (and bear responsibility for mistakes) jointly. The authors recommend that at least two backup trustees be named in every trust in case the one can’t continue to act or refuses to serve.

A trustee’s job can be a dangerous one depending on the funding of the trust. Life insurance is a relatively clean and safe asset to make payable to or have owned by the trust. But consider real estate, perhaps an apartment house, manufacturing business, or gas station placed into the trust to provide income and avoid probate. Consider the liability of the trustee for fines, cleanup costs, and damage to the environment if hazardous waste is found on the property, even if the hazard was created long before the trust and without the knowledge of the trustee.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

Leave a comment

A Quick and Easy Life Insurance Needs Calculator