Duties of Trustees

Trustees, like all fiduciaries, have many duties to the beneficiaries of a trust, and also to the person who creates the trust. It is impossible to list all of the specific duties that a trustee must discharge, but the following list briefly describes some of the more common duties. Please be advised that these descriptions are very general, and the duties of a particular trustee will vary based on each trust's unique facts and circumstances.

1. The duty to invest trust assets prudently. Pennsylvania's recent adoption of the Prudent Investor Rule has significantly changed trustee responsibilities regarding investments. Trustees must be concerned not only with preserving the value of trust assets, but in some cases in generating sufficient income for income beneficiaries and sufficient capital appreciation for remainder beneficiaries.

2. The duty to inform beneficiaries. Generally stated this duty requires trustees to inform beneficiaries of material facts and circumstances having an impact on the interests of the beneficiaries.

3. The duty to account for all financial activities. This duty requires trustees to account for all financial activities of the trust, including the duty to show the date, amount, and description of each receipt, disbursement or distribution from the trust. Typically, this duty is discharged by preparing an itemized accounting for the trust that is either approved informally by the beneficiaries or submitted for formal approval to the Court.

4. The duty of impartiality. The trustee is not permitted to take positions which benefit one beneficiary or group of beneficiaries over another, but instead must maintain neutrality in disputes among beneficiaries.

5. The duty to segregate funds. Trustees are required to keep trust funds segregated from their personal funds.

6. The payment of income taxes. Trusts are, in most cases, separate tax payers and must file state and federal income tax returns. The trustee is charged with preparing these returns and notifying beneficiaries of any income that the beneficiaries must report with respect to trust investments.

7. Payment of claims. The trustee must evaluate all claims presented and pay all valid claims against the trust. These often include administrative expenses incurred in investing, safeguarding, and distributing assets to beneficiaries, fees for professional advisors such as accountants, attorneys, and investment advisors, and expenses incurred maintaining trust assets. Examples of these types of expenses are real estate taxes and maintenance expenses.

8. Duty to pursue claims. In some cases, trustees are responsible for pursuing claims of the trust against third parties and resolving claims with third parties against the trust. Under certain circumstances, these claims must be pursued by the beneficiaries, but in others, the trustee is charged with this responsibility.

There are numerous other duties that trustees may have as part of their responsibilities. The Restatement of Trusts represents the most comprehensive discussion of trustee liability generally available. This publication is written by trust law experts and represents their opinion as to what the law governing trusts should be. It is generally adopted in most states, although state legislatures and state courts may modify the provisions of the Restatement slightly from state to state. The Restatement of Trusts is generally available in local law libraries for review by the public. The most current edition is the Restatement of Trusts, 3d.