Understanding the Duties of a Virginia Trustee
A Trustee is someone who has been designated by the creator of a Trust to hold legal title to the Trust property and to administer the Trust for the benefit of the Trust Beneficiaries and in accordance with the terms of the Trust and the specific purposes for which it was established.
It is not uncommon for the person establishing a revocable Trust (this person is variously called the “Grantor” or “Trustor” or sometimes the “Settlor”) to act as its initial Trustee and be the sole Beneficiary for his or her lifetime. However, it is also common and permissible for the Grantor to designate some other individual or entity to serve as a Trustee after the Grantor passes away or becomes incapacitated.
Most individuals feel honored when they are asked to act as Trustee of a friend or loved one’s Trust. However, being a Trustee isn’t just an honor, it also comes with many duties and obligations.
The general duties of a Trustee vary depending on the laws of the state where the Trust is established. Here is a list of the primary duties of a Trustee based on Virginia statutes:
Duty to Administer the Trust in Good Faith
The first duty of a Trustee is to administer the Trust in good faith, according to its terms and purpose, in the interest of the Trust Beneficiaries, and in accordance with Virginia Trust statutes. This involves reviewing the Trust document to determine how the Trust is to be administered, when and how distributions are to be made, when debts are to be paid, etc.
Duty of Loyalty
The Trustee has the duty to administer the Trust solely in the interest of the Trust Beneficiaries. This means that the Trustee must not use the Trust as a source of funds for personal activities or investments (i.e. the Trustee must not gamble with the Trust funds or invest them in speculative ventures). All expenditures should be solely in the interest of the Trust Beneficiaries.
Duty of Impartiality
If the Trust has more than one Beneficiary, the Trustee must act impartially when investing, managing, and distributing the Trust property. In other words, the Trustee cannot favor one beneficiary over the others.
Duty to Exercise Reasonable Care and Skill
The Trustee should administer the Trust reasonably and prudently. This means not making haphazard or random choices when it comes to investing and managing the Trust assets or business dealings.
If the Trustee possesses special skills or expertise, it is then his or her duty to use them to the benefit of the Trust. For example, if you are a CPA or an attorney, you are expected to use your skills and training for the Trust.
Duty of Efficient Spending
The Trustee may only incur expenses that are responsible in relation to the Trust property. For example, it may be reasonable to pay an attorney $40,000 to fight a lawsuit if the Trust is worth millions of dollars. However, that would be quite unreasonable if the Trust is only worth $50,000.
Duty to Give Personal Attention to the Affairs of the Trust
As a Trustee, you have a duty to perform all of the duties required of a Trustee personally. However, you may exercise reasonable care and delegate duties to others who have special skills or expertise (an agent). However, you must exercise skill and caution when selecting the person to whom you will delegate duties. You must also establish the scope and terms of that delegation and periodically review the agent’s actions and compliance with the scope and terms of the delegation.
Duty to Protect Trust Property
As a Trustee, you must take reasonable steps to preserve and protect the Trust assets and make sure that Trust assets are not stolen or wasted.
Duty to Enforce and Defend Claims
A Trustee must take reasonable steps to enforce claims against the Trust, taking into account whether the pursuit of the claim is worth it under the circumstances. Likewise, the Trustee must take reasonable steps to defend any claims against the Trust or Trust property.
Duty to Keep Adequate Records
This is both a protection for the Trust and for the Trustee. Keeping good records will make it easier when preparing taxes, doing accounting, etc.
Duty to Furnish Information
The Trustee is responsible for keeping the qualified Beneficiaries of the Trust reasonably informed and responding to requests from Beneficiaries regarding the Trust.
As you can see being a Trustee is a big job, but that doesn’t mean you have to do it alone. You have the right to (and duty) to hire an expert to make sure things are handled properly.
If you have any questions about your duties as a Trustee, we would love to help. Give us a call at (703) 553-2577, or use the contact form on our website to arrange a consultation with an experienced estate planning attorney.
The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.