Have You Been Designated as the Trustee of a Trust and Need Help?

Our attorneys at The Golden Rule Law Group^Ⓡ understand the unique challenges local trustees face. If you've recently been designated as a trustee, we offer the guidance you need to navigate your fiduciary responsibilities with confidence.

As a trustee, you will have significant fiduciary duties, and you will be held to a very high standard of care when administering the trust. A trustee also risks possible exposure to personal liability. There are many responsibilities and duties that fall to the trustee.

Read the trust document carefully, both when you first become the trustee and any time after that point, should you have questions about your duties. Pay close attention to your powers, your successor trustee, your inventory, your duty to account, and your right to be compensated. Many of your duties are required by law. Some of those, but not all, are as follows:

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• A.R.S. § 14-10801. Duty to administer trust “On acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries and in accordance with this chapter.” 
  
  You must follow the directions set forth in the trust document in good faith. In the most basic language, good faith generally means with proper motives, and the absence of good faith generally means with improper motives.

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• A.R.S. § 14-10802. Duty of loyalty “A trustee shall administer the trust solely in the interests of the beneficiaries.” 
  
  Generally, avoid sales or other transactions for your own personal account, or otherwise affected by a conflict between your fiduciary (trustee) and personal interests. Avoid using the trust assets for your own benefit unless the trust authorizes you, as the trustee, to do so. Misuse of trust funds is generally a breach of duty that can be the cause for removal as trustee, with a judgment for damages personally.

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• A.R.S. § 14-10803. Impartiality “If a trust has two or more beneficiaries, the trustee shall act impartially in investing, managing and distributing the trust property, giving due regard to the beneficiaries' respective interests.” 
  
  Treat all beneficiaries the same and avoid favoring one over another unless the trust authorizes you to do so. This applies especially where one beneficiary is entitled to principal and another to income.  Generally, impartiality is a key to being a good trustee. One problem with conflicts of interest is that they work against impartiality.

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• A.R.S. § 14-10804. Prudent administration “A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distributional requirements and other circumstances of the trust.  In satisfying this standard, the trustee shall exercise reasonable care, skill and caution.” 
  
  ‍Generally, safeguard trust assets in a prudent manner that is calculated to result in safe and reasonable growth with minimum risk, avoiding risky or speculative investments. Generally, since losses can be held against you personally, liquidating any risky positions may be your safest strategy. Consulting with a reputable financial advisor is also advisable.

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• A.R.S. § 14-10809. Control and protection of trust property “A trustee shall take reasonable steps to take control of and protect the trust property.” 
  
  Generally, this means gaining control over and making sure real and personal property is secure and insured. This can be a lot of work! One of the most important tasks, among others, is assembling a good inventory so you know what the assets are, and setting up your bookkeeping so that you can pay the bills as necessary.

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• A.R.S. § 14-10810. Record keeping and identification of trust property “A. A trustee shall keep adequate records of the administration of the trust. B. A trustee shall keep trust property separate from the trustee's own property”. 
  
  ‍Generally, maintain clear and accurate records of the trust administration. Failure to do this can result in a breach of duty and lead to your removal as trustee and liability for whatever damage you may have caused. By the same general rule, keep all trust bank accounts and investments separate, and avoid mixing trust assets with your own. This is very important. Mixing trust money with your own money is called commingling, and it is a breach of duty which can lead to your removal as trustee and liability for whatever damage you may have caused.

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• A.R.S. § 14-10813. Duty to inform and report “A. Unless the trust instrument provides otherwise, a trustee shall keep the qualified beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.” 
  
  Generally, notify the qualified beneficiaries of your acceptance and name, address, and telephone number. Also generally, on request, and, at least annually and at the termination of the trust, send a report of the trust property, liabilities, receipts and disbursements, including the source and amount of the trustee's compensation, a listing of the trust assets and, if feasible, their respective market values. File tax returns and pay any taxes that are due. The best plan is to use a CPA familiar with fiduciary returns.

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There are many other responsibilities and duties that fall to the trustee. If you have agreed to act as a trustee, our legal team can guide you through the process. When working with our law firm, you will have a legal team with over 84 combined years of experience. We take pride in taking the stress off of your shoulders and putting it on ours. We offer a free 20-minute initial consultation during which we can determine how we can assist you.

Call now: (480) 908-9051. We are ready to help. Our firm primarily serves the areas of Chandler, Gilbert, Phoenix, Scottsdale, Fountain Hills, and other areas around Maricopa County.