Duties of a Fiduciary in Estate Planning

Responsibilities of a Fiduciary under Common Estate Planning Documents

A Personal Representative has the responsibility to distribute the tangible personal property (furniture etc.) to beneficiaries after someone passes away.  Additionally, they are to identify any assets (such as checking accounts or other types of accounts) that are in the decedent’s name and re-title them to the trust, where the trustee will then manage that account according to the trust.

Durable Power of Attorney

The Durable Power of attorney steps into another ‘s shoes if they become incapacitated and use their individual assets to pay expenses, fees, and costs such as a mortgage, car payment utilities, etc. until the person is capable of managing their own financial affairs again.

Health care Power of Attorney

If a person becomes incapacitated, the agent under this document steps into another’s shoes related to health care decisions and will carry out that person’s health care wishes according to the instructions of the document.

Trustee under a Trust

A trustee is given authority over assets that are owned by a trust to be used for the benefit of another.  For most revocable trusts, a successor trustee steps into this position upon the prior trustee becoming incapacitated, unable to perform such duties, or passes away.  The duties of a trustee are very important in the eyes of the law and there can be serious consequences if a trustee fails to perform their responsibilities properly.

A trustee has the responsibility to manage trust assets for the beneficiaries of that trust.  This can include overseeing the purchase and sale of real estate, managing retirement accounts, business interests, stocks, bonds, financial accounts, paying bills, filing taxes, and managing other titled assets and transactions.  In addition to managing such assets, the state laws of Arizona require trustees to invest and manage trust assets in a way that would not subject the assets to unnecessary risks.  Furthermore, trustees are required to report and give accountings of their management of such assets to the beneficiaries in regular intervals.   Throughout the process of managing such assets, the trustee must be in compliance with many other fiduciary requirements under the law.

In the event that a beneficiary of a trust was to pass away, a trustee may be required to liquidate such assets in preparation to distribute the assets to a different beneficiary. Also, a trustee may be required to set up and fund a new trust for the use and enjoyment of another beneficiary.

If a trustee fails in their duty to meet the above requirements they may be surcharged for the amounts of money or assets that were mismanaged. They also may be forced to return compensation that they incurred while carrying out their duties as a trustee. In extreme cases, a trustee may subject themselves to criminal liability as well.

Most well-drafted trust documents give trustees instruction as to their powers and duties. However, every trustee is responsible to know what the law requires and expects of a trustee regardless of whether the trust documents specify responsibilities or not.

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