October 2005

What To Do If You’re Suddenly A Trustee

Many people establish trusts as a way to pass on their wealth to their family and loved ones. However, some beneficiaries inherit more than just the assets in the trust – they also receive the title of trustee and all of the duties and responsibilities that go along with it.

A trust is established to hold assets such as property, cash, stocks or bonds, for the advantage of a beneficiary. As a trustee, it is your responsibility to manage the assets according to the terms outlined in the trust. While this may seem simple on the surface, it can be quite complex, especially given the wide choice of investments, the responsibilities imposed by trust law, the ever- changing tax code and the abundance of paperwork involved in managing a trust. If you’re feeling overwhelmed by your new responsibilities, don’t worry, there are three ways to get help:

Custodian – Hiring a custodian may be a good idea if you are primarily seeking help managing the paperwork involved with a trust. Custodians typically account for the trust’s income and principal and help you keep up with tedious tasks such as paying recurring bills. In addition, a custodian can help you prepare annual tax information and provide monthly account statements. Many custodians can also assist you with the buying or selling of securities and the collection of dividends. While a custodian can execute your buy and sell decisions, it is important to remember that a custodian does not offer investment advice.

Managing Agent – Unlike a custodian, the primary function of a managing agent is to help you decide what investments are the most appropriate to meet the goals of the trust. There are two ways to hire a managing agent, either on a discretionary or non-discretionary basis. With a discretionary arrangement, you give the agent the authority to make decisions about how to invest the assets in the trust. This can alleviate you from the day-to-day responsibilities of managing the assets. A non-discretionary arrangement means that your managing agent will offer you advice on how to invest the funds in the trust, but you will actually make the final decision on what investment vehicles you use.

Like a custodian, managing agents can also assist you with record-keeping and bill-paying, and can provide monthly account statements. Other services they may provide include collecting and reinvesting dividends as well as capital gains.

Professional Co-Trustee – A professional co-trustee essentially becomes your partner in administering the trust. This option is usually attractive as it allows you to still be a part of the decisions affecting assets held in the account, but it removes you from most daily duties of the trust. However, the terms of the trust must provide for the appointment of a co-trustee. An important feature of having a co-trustee is that it adds an impartial third party to the investment decisions. Having a professional co-trustee can give you the best of both worlds. It satisfies the need for someone who is attuned to personal family concerns while adding someone who can professionally handle the responsibilities, administration and investment management duties of the trust.

Serving as a trustee can be a very daunting position and the responsibility of administering a trust fund can be taxing. Naming a co-trustee, managing agent or custodian can be helpful, especially if you don’t have the time it takes to fulfill all of the duties entrusted to you.

This article provided by Carla Liberatore, Vice President, Investments and Lori Williams, AAMS, Financial Consultant,  A.G. Edwards & Sons, Inc. 3110 Edwards Mill Road, Raleigh,  781-9470   Member SIPC.