Being a trustee is no small task. It’s a role filled with responsibilities, and the stakes get even higher when you realize that you are dealing with someone’s life savings, assets, or even their well-being.
However, not all trusts are the same, and neither are the duties you have as a trustee. In this blog, we’ll dissect the roles and responsibilities a trustee holds in different kinds of trusts: revocable living trusts, irrevocable trusts in general, and special needs trusts in particular.
Revocable Living Trusts: Flexibility and Accountability
Duties and Responsibilities: When it comes to a revocable living trust, you’re dealing with a flexible beast. The grantor – the person who sets up the trust – will be the trustee while they are living. After death, the successor trustee that is named in the trust will manage and distribute the assets under the terms set forth in writing by the grantor.
What Makes it Unique: As we have stated, the grantor can act as the trustee in a revocable living trust. This is a unique arrangement, and another thing that sets the living trust apart from a will is the fact that the distributions are not subject to probate.
Irrevocable Trusts: More Rigidity
Duties and Responsibilities: With irrevocable trusts, the terms are generally unchangeable once set, but there are limited exceptions to the rule. As a trustee, your role here is far more rigid. You must manage the assets, make distributions, and ensure that you’re complying with both the trust’s terms and applicable laws. Filing taxes for the trust may also fall under your purview.
What Makes it Unique: You can’t act carelessly because beneficiaries can’t easily change the terms to correct any mistakes you make. The courts often have to intervene to fix errors or to remove and replace a trustee.
Special Needs Trusts: A Balancing Act of Needs and Laws
Duties and Responsibilities: A special needs trust is set up to benefit someone with a disability. If you are the trustee, you will manage and disburse assets without jeopardizing the beneficiary’s eligibility for government benefits like Medicaid. You’ll also need to keep accurate records and may have to file annual reports with the court or government agencies.
What Makes it Unique: The key challenge is ensuring the beneficiary remains eligible for public benefits. This means you can’t just disburse funds for anything. Knowing what counts as a “qualified expense” is crucial. Missteps can lead to loss or reduction of benefits, so tread carefully.
Common Threads: What Every Trustee Must Do
1.) Act In Beneficiary’s Best Interest: Regardless of the type of trust, your actions must benefit the beneficiary. Any form of self-dealing or mismanagement can lead to legal repercussions.
2.) Maintain Accurate Records: Proper record-keeping is non-negotiable. Whether it’s tracking asset performance in an irrevocable trust or accounting for disbursements in a special needs trust, keep your records straight.
3.) Communicate: Keep lines of communication open with beneficiaries. Transparency can often prevent misunderstandings and potential legal action.
4.) Consult Professionals: If you’re unsure about tax laws affecting an irrevocable trust or the permitted disbursements in a special needs trust, consult professionals. Legal advice can save you from costly mistakes.
Final Takeaways
Being a trustee is a job that demands attention, care, and a good understanding of the rules that govern different types of trusts. While the core principles remain the same, the specific duties can vary widely. Make sure you understand what’s expected of you as a trustee and don’t hesitate to seek professional advice to navigate the complex landscape of trust management.
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While he was in law school, he worked as an aide to the late John Sparkman, Senior Senator from Alabama. This gave him the opportunity to gain intimate knowledge of the workings of government, and this background has served him well.
He started his private practice in New York in 1974, the first Sikh to be admitted to the bar in the state of New York.And in 1995, when he narrowed his legal focus to the areas of estate planning and elder law, the prestigious American Academy of Estate Planning Attorneys accepted him into their membership.
Special needs planning is an important aspect of the field, and Mr. Khalsa has intertwined his empathy with his expertise to become a leading advocate in this area. Shortly after the Education for All Handicapped Children Act was enacted in 1975, he won the first case in New York that was adjudicated under this law.
S.J. Khalsa has a penchant for philanthropy, and he has raised well over $20 million for charities nationwide. He is a deeply spiritual man who represents the Sikh religion at religious and interfaith gatherings all over the globe.
He believes that successful professionals should contribute to the fabric of their communities, and to this end, he works with law enforcement in New York.
Mr. Khalsa is a graduate of the FBI Citizens Academy program, and he is active in their Alumni Association. He is a member of the FBI/New York Police Department Joint Task Forces on Civil Rights and Hate Crimes, and he sits on the Community Engagement Council that advises the FBI Assistant Director for New York.
He is the author of the highly acclaimed book, Estate Planning Essentials: A Guidebook for Modern Families. Lawyers of Distinction recognized him for his excellence in 2020, naming him a 2020 Power Lawyer, and he is a member of the prestigious American Academy of Estate Planning Attorneys.
Mr. Khalsa lives in Manhattan with his wife, and he has two grown children and four grandchildren. He likes to travel, and he is an avid golfer. As the co-owner of Kundalini Yoga East in New York along with his wife, he instructs practitioners and aspiring yoga teachers.
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