What to Do If You're Suddenly a Trustee

Physician's Money Digest, September 2006, Volume 13, Issue 9

Many people establishtrusts as a wayto pass on theirwealth to theirfamily and lovedones. However, some beneficiariesinherit more than just the assets in thetrust—they also receive the title,trustee, and assume all of the duties andresponsibilities that go along with it.

A trust is established to hold assets(ie, property, cash, stocks, or bonds)for the advantage of a beneficiary. As atrustee, it is your responsibility to managethe assets according to the termsoutlined in the trust. While this mayseem simple on the surface, it can bequite complex, especially given thewide choice of investments, the responsibilitiesimposed by trust law, the everchangingtax code, and the abundanceof paperwork involved in managing atrust. If you're feeling overwhelmed byyour new responsibilities, don't worry,the following three resources can help.

•Custodian. Hiring a custodianmay be a good idea if you are primarilyseeking help managing the paperworkinvolved with a trust. Custodianstypically account for the trust's incomeand principal, and help you keep upwith tedious tasks such as payingrecurring bills. In addition, a custodiancan help you prepare annual tax informationand provide monthly accountstatements. Many custodians can alsoassist you with the buying or selling ofsecurities and the collection of dividends.While a custodian can executeyour buy and sell decisions, it is importantto remember that a custodian doesnot offer investment advice.

•Managing agent. Unlike a custodian,the primary function of a managingagent is to help you decide whatinvestments are the most appropriateto pursue to meet the goals of the trust.There are two ways to hire a managingagent: on a discretionary or nondiscretionarybasis. With a discretionaryarrangement, you give the agent theauthority to make decisions about howto invest the assets in the trust. Thiscan alleviate you from the day-to-dayresponsibilities of managing the assets.Having a nondiscretionary arrangementmeans that your managing agentwill offer you advice on how to investthe funds in the trust, but you willactually make the final decision onwhat investment vehicles you use.

Like a custodian, managing agentscan also assist you with record keepingand bill paying and can also providemonthly account statements. Otherservices they may provide include collectingand reinvesting dividends, aswell as capital gains.

•Professional cotrustee. A professionalcotrustee essentially becomes yourpartner in administering the trust. Thisoption is usually attractive as it allowsyou to still be a part of the decisionsaffecting the assets held in the account,but it removes you from most dailyduties of the trust. However, the terms ofthe trust must provide for the appointmentof a cotrustee. An important featureof having a cotrustee is that it addsan impartial third party to the investmentdecisions. Having a professionalcotrustee can give you the best of bothworlds. It satisfies the need for someonewho is attuned to personal family concerns,while adding someone who canprofessionally handle the responsibilities,administration, and investmentmanagement duties of the trust.

Serving as a trustee can be a verydaunting position, and the responsibilityof administering a trust fundcan be taxing. Naming a cotrustee,managing agent, or custodian can behelpful, especially if you don't havethe time it takes to fulfill all of theduties entrusted to you.

Joseph F. Lagowski is vice president, investments,and a financial consultant with AGEdwards in Hillsborough, NJ. He welcomesquestions or comments at 800-288-0901, orvisit www.agedwards.com. This article wasprovided by AG Edwards & Sons, Inc, member SIPC.