Duties of trustee

Duties of trustee

The most important aspect of a trustee's duties is its fiduciary character. A trustee is legally and morally bound to manage the trust property in a responsible and productive manner, and is under an absolute obligation to act solely for the benefit of the trust's beneficiaries. His or her duties, in general, include to (1) become fully acquainted with the terms of the trust, (2) ensure that the trust property is vested according to the terms of the trust, (3) act without charging any fee except where expressly allowed, (4) never allow his or her funds to be commingled with those of the trust, (5) never enter into any transaction with the trust, (6) never delegate his or her duties, (7) act impartially and solely in the interest of all beneficiaries, and (8) manage the trust property in a prudent and businesslike manner. The requirements for prudence may be waived if the trust's beneficiaries (of legal age and sound mind) indemnify the trustee from doing something that may disturb the terms of the trust but which all beneficiaries endorse
Terms:
Ministerial function:
A function as to which there is no occasion to use judgment or discretion.
Discretionary acts:
Those acts that have no preconceived course of conduct that one must or must not take, thereby requiring the judgment and choice of the person performing the act.
Imperative acts:
Those acts that are required to be done.
Prudent Man Rule:
The trustee may invest in a security if it is one which a prudent man of discretion and intelligence, who is seeking a reasonable income and preservation of capital, would buy.
“Statutory list”:
A list of approved investments for trusts or other fiduciary relationships.
General duties of trustees
Duty to administer trust according to its terms
When a trustee accepts this position, he or she is obligated to carry out the settlor’s intentions, as stipulated in the trust agreement. As mentioned in the last section, the trustee can delegate some of the duties to others; however, the trustee is still personally responsible for the administration of the trust assets and must therefore use care when delegating duties to others.
Traditionally, a trustee had more latitude in delegating routine “ministerial” functions of the trust, while personally performing duties that involved using decision-making skills—discretionary functions. In determining the acts which a trustee may properly delegate, some of the relevant factors are:

the amount of discretion involved;

value of the property;

whether the act is related to principal or income;

the remoteness of the subject matter of the trusts; and

whether the act involves professional skill possessed by the trustee herself.

Today, given that one of the trustee’s functions is ensuring that the trust assets are productive, it would be reasonable for the trustee to consult with qualified investment professionals for advice on the best course to take.
Regardless of which type of functions the trustee may decide to delegate, she must monitor and supervise the conduct of these agents, in keeping with her ultimate obligation of safeguarding the beneficiaries’ interests, which cannot be delegated. If the trustee merely accepts outside advice without diligently evaluating its suitability for the trust’s beneficiaries, the trustee faces being liable for breach of trust and any losses attributable to this lapse in judgment. See, e.g., Shiners’ Hospitals for Crippled Children v. Gardiner, 733 P.2d 1110 (Ariz. 1987).