What is a Trustee?

When the owner creates the trust, he or she must appoint a person they know (such as themselves or family) or entity (like the trust department of a bank) to manage the trust. This person or entity is called a trustee. The owner also chooses the person or entity (such as charity) who will benefit from the trust, this person is called a beneficiary. In some trust structures, such as living trusts, the owner/grantor, trustee, and beneficiary can be the same person. In situations with all 3 being the same person(s), the owner/grantor should also appoint or define a successor trustee and beneficiary in case he or she dies or becomes incapacitated. A trust is a common estate planning tool because, after the owner’s or grantor’s death, a trust circumvents the probate court process, which a “Will” must follow.  A trust can also include certain operating provisions, such as restricting distributions to a child until they are of a certain age.  Trustee’s are held to a high standard, meaning if they do not manage the trust properly, they are held personally liable.

For companies with a qualified retirement plan, a trust is formed to allow tax favored contributions to be placed in the trust for the employee(s) benefit.  They also have operating provisions, such as restricting distributions until the beneficiary reaches a certain age.  Tax Law requires retirement plans to be managed in a certain way, and the trustee becomes personally liable if the trust is not managed properly.

TrusteeMarketplace.ORG was developed to help corporate or family trustees understand their roles and responsibilities to ensure happy beneficiaries.