Duties of a Trustee
A Trust is an arrangement for holding, managing, and distributing property in which the owner of the property (the “Settlor” or “Grantor”) transfers property to a person or institution (the “Trustee”), and the Trustee holds, manages, and distributes the property for the benefit of another person or group of persons (the “Beneficiary”) for a particular purpose or purposes.
The Trustee has a fiduciary duty to manage the assets in the best interests of the beneficiaries of the Trust. Maryland law provides that a Trustee must act with the same standard of care as any “prudent person” would act with respect to his or her own property. The Trustee must follow the directions set forth in the Trust document and must balance the current and anticipated needs of all beneficiaries of the Trust, including future beneficiaries. The Trustee should generally avoid risky or speculative investments.
From time to time, a beneficiary may ask the Trustee for a distribution of some portion of the Trust assets. It is preferable for all distribution requests to be in writing. The Trustee should respond to distribution requests in a timely manner, and should consider the Settlor/Grantor’s instructions in the Trust document, the size of the Trust, the beneficiary’s current and future needs, the beneficiary’s other sources of income, and the Trustee’s responsibilities to other beneficiaries of the Trust. In some cases, the Trustee will have to say “no” to a request for a distribution.
The Trustee should keep detailed records of the investments, income, expenses, and distributions of the Trust. If requested by one or more of the Trust beneficiaries, the Trustee must provide an accounting to the Trust beneficiaries. The Trustee is responsible for keeping the records necessary to prepare the Trust’s income tax returns, and for arranging for the preparation of these returns each year.
The Trustee can hire attorneys, accountants, financial advisors, and other professionals to assist the Trustee with various tasks, but the Trustee is still held primarily responsible for fulfilling all of his or her duties. Trustees are entitled to reasonable compensation for their services. In Maryland, this compensation is generally set by statute, and is based on percentages of the income and principal of the Trust.
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