When a trust document appoints someone to serve as a trustee in Texas, they may not know what exactly they must do to administer the trust, especially if they have little or no personal or professional experience with trusts. But what does the trustee of a Texas trust have to do as part of their trust administration duties?
When Does Trust Administration Begin?
The start of trust administration depends on various factors that determine when a trust becomes effective. In most cases, a trust becomes effective when the settlor (the person who creates the trust) executes the trust document and funds the trust. However, the trust document can set a future effective date or identify a contingent event that must occur before the trust becomes effective. Certain types of trusts also become effective at a specific event in the future; for example, a testamentary trust becomes effective only after the settlor’s death, as the settlor’s will funds the trust from the settlor’s estate.
Fiduciary Duties of Texas Trustees
The law imposes various fiduciary duties upon trustees, which they owe to the trust and its beneficiaries. These duties include:
- Duty of loyalty: The duty of loyalty requires a trustee to act solely in the interest of the trust and its beneficiaries and to refrain from receiving any benefit or advantage to the trust’s detriment. As a result, trustees must not act under a conflict of interest or engage in self-dealing (e.g., taking excessive management fees or directing the trust to transact with the trustee’s affiliates).
- Duty of care or prudence: The duties of care and prudence apply to both non-professional trustees and professional trustees (e.g., attorneys, financial advisors, trust companies). These duties require trustees to manage trust assets with reasonable care and caution and to seek professional advice when issues related to trust management fall outside a trustee’s education, training, or experience.
- Duty of impartiality: Trustees must treat all benefits fairly, without showing preference or advantage to one beneficiary or group of beneficiaries over another unless the trust document expressly directs greater benefits to a beneficiary or group of beneficiaries. Furthermore, trustees should balance the interests of beneficiaries currently receiving distributions of trust income with those of remainder beneficiaries entitled to distributions of assets upon the trust’s termination.
Trustee Responsibilities During Administration
Some of the primary responsibilities of a trustee during trust administration include:
- Identifying and securing trust assets, including ensuring the valid transfer or titling of assets in the trust’s name, or securing physical assets given to the trust
- Managing and investing trust assets, especially within the guidance or restrictions established by the settlor in the trust document
- Paying debts and expenses, such as mortgages or utilities for real estate held by the trust, and income taxes owed on the trust’s investments
Notice and Disclosure Requirements
Trustees must also identify beneficiaries named in the trust document and notify them of the trust’s existence and their beneficiary status. In Texas, a trustee must disclose any facts they know might affect a beneficiary’s rights. In addition to disclosing the trust’s existence, trustees must also notify beneficiaries of any trust transaction in which the trustee has an interest or from which the trustee might benefit, regardless of whether a beneficiary asks for such information. Beneficiaries also have the right to request a listing of the trust’s investments and an accounting of the trust’s receipts and disbursements.
Distributions to Beneficiaries
Trustees must make distributions of principal and income from trust assets as directed by the trust document. The trust document may also give trustees discretion over whether to issue distributions to beneficiaries and the amount of those distributions.
Contact a Trust Administration Lawyer Today
A trustee of a Texas trust has various duties when overseeing the trust. Contact Carroll Law Group, PLLC today for a free consultation with a trust administration attorney if a trust document has appointed you as the trustee to learn more about your obligations during trust administration in Texas.