What are the Duties of a Trustee of a Trust?

A trustee of a trust created and funded by somebody other than the trustee has several legal obligations. If the trustee fails to satisfy these obligations, the beneficiary can sue the trustee.

Here are the primary duties of a trustee of a trust created by somebody other than the trustee and the trustee is not the current beneficiary of the trust.

1. Be a Fiduciary: The trustee has a fiduciary duty to act with loyalty, good faith, and in the best interest of the beneficiary. The trustee must avoid conflicts of interest.

2. Understand the terms of the Trust and ensure safety of assets: Assets within the trust must remain safe, so the trustee must understand the basic terms outlined in the trust agreement. He or she should know who all the beneficiaries are and have access to and review all the records to ensure they’re in order and accurate.

3. Invest assets when necessary: If the trust dictates, the trustee should invest assets with the intention of preserving them now and in the future.

4. Safeguard the Trust Assets:  Trustees must protect and manage trust assets. This involves prudent investment strategies, diversification, and regular reviews of the investment portfolio. Trustees should consider the beneficiary's’ needs, risk tolerance, and financial goals when making investment decisions.

5. Administer the Trust:  The day-to-day administration of the trust involves various tasks, such as maintaining accurate records, managing income and expenses, paying taxes, and distributing assets to beneficiaries as stipulated in the trust documents.

6. Send Reports to the Beneficiaries:  In Arizona, trustees are required to provide periodic reports to beneficiaries.

7.  Carry Out the Trustmaker’s Wishes:  The trust agreement states what happens to trust assets after the trustmaker(s) dies. The trustee is legally obligated to follow trust agreement instructions and make decisions that carry out the trustmaker’s intentions.

8.  Make Wise Investments:  Trustees must be knowledgeable about financial markets and investment strategies. They should act prudently when making investment decisions, aiming to achieve a reasonable return while minimizing unnecessary risks.