What are the roles of a trustee or beneficiary

Welcome to the trusts and estates world and its intricacies therein. One of the most important legal papers you can draft in your lifetime for your protection and the protection of your loved ones is your estate plan (aka your trust). But in the universe of trusts, the terminology, what they mean, and who it pertains to can be confusing for someone just learning about it for the first time. Allow us to glance over the roles that function within a trust and their duties so you can be more at ease during the process of creating your instrument.

Think of a trust as a corporation. And much like a corporation, there are different roles, and each role has a responsibility. In the same way, a trust is like a corporation that serves to protect the assets within and gives directives as to what happens with those assets. There are three prominent roles in a trust: the Grantor, the Trustee, and the Beneficiary.

The Grantor is the person creating the trust. The person that is putting assets, things of value – whether it is real property, personal property, or intellectual property – to be protected by the trust. He is also the person that will establish which directives need to be followed. There are many types of trusts that can be created, and there is never a single answer as to which is best since that will depend exclusively on the needs and wishes of the grantor.

The Trustee, or trustees, is designated by the grantor to manage the trust and its assets. The trustee position has a fiduciary responsibility to act in the best interest of the beneficiaries of the trust. In this role, the person does not enjoy the benefits of the assets of the trust, but he is there to manage that the wishes of the grantor are being completed as per the trust agreement.

And finally, the beneficiary, or beneficiaries. This is the person that is in a position to enjoy the benefits of the assets. Whether those benefits are enjoyed while the grantor is alive or they become available after the death of the grantor of the trust will depend on what kind of trust we are talking about.

At The CREM Group, we have extensive experience working together with trustees since those are the people left in charge of the trust. One of the responsibilities of a trustee is to manage the real estate left behind. Many times, this management will involve the sale of the estate in order to provide the maximum benefit for the beneficiaries. These two positions, the trustee and beneficiary, are directly intertwined. Let’s cover some more about their specific responsibilities.

 

The roles of a trustee are many, including but not limited to managing finances, investing assets, making distributions to the beneficiaries, and avoiding conflicts of interest, among others. In general, the many duties of a trustee fall into three main categories, and those are the investment, administration, and distribution of assets.

As the persons for whom the trust assets are being held, the main role of any beneficiary, for the most part, is to wait. It may be that the beneficiary can benefit from the assets during the life of the grantor, but the majority of times, the trusts are set up to take effect after the grantor has passed away.

Once the trust has been activated, the beneficiary then has the legal responsibility to enforce the trust. In California, as in any other state, the beneficiary can request a full accounting of the trust and stay on top of the trustee acting on their fiduciary responsibilities. The beneficiary can even take legal action against the trustee if he believes that the trustee may be in violation of their fiduciary responsibilities.

This may seem like a trick question at first, but the truth is the answer will depend on what exactly you are referring to with “rights.” Overall, it is true that the trustee has a lot more power as far as the actual management of the trust is concerned. And as far as compensation goes, under California law, the trustee is entitled to be reasonably compensated. However, the law can get a little hazy in practice.

To avoid conflict, an estate planning attorney will recommend setting a compensation fee clearly in the trust agreement. For corporate trustees, this can range between 1-2% of the trust’s total assets per year or an hourly fee per hour worked, adjusted for inflation, ranging between $100-$150 per hour.

But the beneficiary has substantially more rights if we are referring to enjoying the benefits of the trust and the enjoyment and usage of the trust’s assets. In a scenario where the trust’s assets are worth $3 million, for example, you can see that the beneficiary is ultimately in a better financial position than the trustee.  In sum, these two roles do not compete because they have their own responsibilities and privileges; they are not at odds with each other.

Most trusts are created in order to avoid court action, and there is no doubt that a well-drafted trust agreement can be a very powerful legal tool to protect assets of any kind. Although you could potentially draft your own trust, it would be best to consult an experienced attorney for the best guidance. The team at The CREM Group is ready to offer you powerful and experienced assistance when it comes time to sell real estate during trust administration or recommend a good estate planning attorney. As a trustee or a beneficiary, you can contact us for a complimentary consultation to see how we can best collaborate on your particular situation. Reach out; we’ll be honored to hear from you.