A trustee is a person or entity responsible for managing and administering your trust according to your instructions and following state law. They are considered a fiduciary (meaning they are held to a higher standard of care and owe certain duties to the beneficiaries). As a fiduciary, a trustee must protect the trust’s investments and act in the best interests of the beneficiaries. They must prepare and maintain trust accounting records and prepare tax-related forms, providing this information to the beneficiaries at their request. At some point, they may need or be required to liquidate or sell the trust’s accounts and property.
Converting Trust Assets to Cash. When administering a trust, the trustee might encounter situations in which they need to convert trust assets into cash to provide liquidity to the trust. This decision must be based on prudent investor rules or standards and be in the best interest of the beneficiaries. A trustee may need to create liquidity for various reasons: meeting financial obligations, covering administrative costs, fulfilling distributions, and responding to opportunities or challenges.
Creating Liquidity. A trustee has the authority and responsibility to manage the trust’s investments in a manner that aligns with the trust’s goals and changing financial circumstances. It may be necessary to modify the investment strategy for a variety of reasons: evaluating economic conditions, risk management, adapting to beneficiary needs, and long-term growth versus income generation.
A Trustee’s Responsibility Regarding Distributions to Beneficiaries. Overall, the trustee must adhere to the instructions laid out in the trust agreement. If the trust’s terms specify that the trustee must distribute money or property to a beneficiary at a particular future date or upon meeting specific conditions, the trustee is obligated to follow these instructions precisely. That is why making informed decisions when creating a trust and defining the trustee’s role and responsibilities is important.
We can help you memorialize your intentions in your trust agreement and strike a balance between preserving your life savings and granting the trustee the necessary flexibility to manage the trust successfully. Give us a call to schedule your appointment today.