Your dad died and you have been named the executor or the trustee. What is your job? You are a fiduciary. You are responsible for taking care of something that belongs to someone else. Your dad provided a document that sets forth your guidelines. It is your job to follow his directions and have a loyalty to all beneficiaries to protect and distribute in accordance with the document and the law.
State statutes further govern your duty to pay all legal obligations and sell or distribute to the correct beneficiaries exactly as the document dictates. You have discretion, if given in the document, but you must always act for the benefit and protection of the beneficiary and not any personal gain. As a beneficiary, you will receive your stated share but you cannot take any action that would favor your personal position over the rights of the other named beneficiaries. That fiduciary duty protects others to insure proper distribution under the law. Your authority should be clearly stated in the instrument or in the State statutes. You must always act in a prudent manner. You cannot place one hundred thousand dollars in a noninterest bearing account. Even though today the rates are minimal, you must work to have all assets gain in value for the benefit of the beneficiaries.
A trustee must protect and preserve all assets. He must sell or distribute in a timely manner. He also must follow the prudent investor rule. If there is a large stock portfolio, he must sell and convert the stock to cash if there is any volatility with the stock. If the trustee fails to act and the stock declines sharply in value without action on his part, he could be held personally liable for his inaction by the other beneficiaries. The trustee must investigate and locate all assets. If he finds an old insurance policy, he has a duty to check with the company to see if it is active. Many policies go unclaimed because no one took the time to determine if it still has value. If the trustee finds any old passbooks or signs of activity at any bank he should take the time to determine if it has been completely closed.
The trustee/executor must also maintain accurate records and account for all assets and any income derived from these assets. Prior to closing the trust, he has a duty to provide a written accounting to all beneficiaries so that they know that all of the assets are accounted for and distributed.
The trustee or executor must also insure that all past and present taxes are fully paid. He must file a final personal income tax return and a fiduciary income tax return for the time from the death of his father until the final distribution.
Most of this is common sense but if the trustee does not do his job, he stands the chance of being personally liable for his misdeeds or lack of performing his duties as a fiduciary. There are many more duties as trustee that will be discussed in future articles.
Jeff Roth is a Member of the firm ROTH and BACON Attorneys, LLC with offices in Port Clinton, Upper Sandusky, Marion, Ohio and Fort Myers, Florida. All members of the firm are licensed in Ohio and Florida. Mr. Roth’s practice is limited to wealth strategy planning and elder law in both states. Nothing in this article is intended for, nor should be relied upon as individual legal advice. The purpose of this post is to provide information to the public on concepts of law as they pertain to estate and business planning.
Copyright Jeffrey P. Roth 2013.