What Are the Trustee’s Fiduciary Duties?
Trusts are popular estate planning tools, but your choice of trustee matters considerably. The beneficiaries will have to deal with the trustee, and those creating a trust need someone who is reliable and trustworthy.
New York law also imposes certain duties on trustees. These fiduciary duties are designed to ensure the trustee acts in the best interest of the trust beneficiaries. When they don’t, then a beneficiary may have the right to seek compensation for a breach of duty. Contact Cavallo & Cavallo today to speak with a Westchester County trust administration lawyer.
Key Fiduciary Duties
The most prominent fiduciary duties include:
- Duty of Loyalty. A trustee must be loyal to the beneficiaries and avoid conflicts of interest or self-dealing. For example, a trustee should not sell property to themselves as individuals for a reduced price. Trustees also cannot favor one beneficiary over the others.
- Duty of Prudence. Trustees must use reasonable care when administering the trust, which means they should make informed choices regarding investment and tax planning. Of course, the terms of the trust might require a trustee to take actions which look risky to outsiders. A trust might actually require investment in volatile investments, like crypto. But a trustee cannot be careless because they are failing to act in a conscientious manner.
- Duty to Account. The trustee must provide information to beneficiaries in a timely manner regarding financial information and other updates. A trustee does not fulfill this duty by ignoring the beneficiary or refusing a request.
- Duty of Confidentiality. The trustee must protect the privacy of the grantor and beneficiaries. It would be a gross violation to give media interviews discussing the details of the trust or clumsily exposing this information to public view.
Other Obligations
Trustees must also maintain proper records which fully document all transactions, tax filings, income, and expenses. This requirement protects both the grantor and beneficiaries. Proper documentation might arise in the context of an audit or legal proceeding. Inadequate record keeping might end up being the basis for a tax penalty or even a loss in litigation.
Trustees are also obligated to make tax filings on behalf of the trust. A trustee should always work with tax professionals to ensure they follow the law and pay necessary taxes. At the same time, working with professionals helps the trustee avoid paying too much in taxes, which would reduce the value of the trust.
Has a Trustee Violated Your Trust?
Contact Cavallo & Cavallo if you have suspicions that your trustee is not following their fiduciary duties or has made other errors. Some reasons to be skeptical include:
- Unreturned phone calls or emails;
- Dramatic losses in the value of any investments;
- Failure to provide sufficient records or clumsily documented information;
A trustee with bad motives will possibly lie to you or forge documents. Trust your instincts and reach out to an experienced trust administration lawyer.
Call Cavallo & Cavallo Today
Our firm has protected the rights of trust grantors and beneficiaries for decades. We are happy to listen to your concerns in a confidential consultation and review what legal options are the best choice.
Source:
nysenate.gov/legislation/laws/EPT/11-2.3
