What to Do if you are a Trustee of a Trust……?
Many people are named as a trustee of a trust but you are not sure what they should do or what it actually means to be a trustee. This article will discuss what a trustee means under Ohio Law and what you should do if you are named a trustee.
A Trustee has a fiduciary responsibility to “…administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries…” [1] A trustee must administer the trust as a ‘prudent person' would taking into consideration the purpose and terms of the trust document.
Taking Control of Trust Property
A trustee must “…take reasonable steps to take control of and protect the trust property.” [2] This means that the trustee must assess and identify what assets are in the trust or what assets need to be transferred into the trust. The most common example of this would be real estate that is owned by the trust.
For example, Jane Smith had created a trust that was named “Jane Smith Revocable Trust dated June 1, 2021”. The deed to her house had been transferred into Jane's trust and the deed was titled as follows: “Jane Smith Trustee of the Jane Smith Revocable Trust dated June 1, 2021”. Jane is now deceased and her brother John Smith is the successor trustee. As a successor trustee John Smith will have to file an affidavit with the local county recorder office that shall change the legal deed to as follows: “John Smith as successor trustee of the Jane Smith Revocable Trust dated June 1, 2021”.
Adequate Records
A trustee “…shall keep adequate records of the administration of the trust”[3] As a trustee of a trust, a person must keep a separate set of records that details all the income and expenses of the trust. This includes having a separate bank account for the trust funds only. A trustee can not “co-mingle” trust assets or income with that of their own. Having a separate bank account for the trust will require that the trustee obtain a federal tax identification number for the trust.
Reporting to Beneficiaries
A trustee also has a fiduciary responsibility to keep the beneficiaries of the trust informed about the administration of the trust. Keeping the beneficiaries informed about the trust includes the following:
- Within 60 days of accepting the trusteeship, the trustee must send written notification to the current beneficiaries that the trustee has accepted the trusteeship and the trustee's name, address and telephone number[4]
- A trustee must notify the beneficiaries of the existence of the trust, who created the trust and that the beneficiaries are entitled to a copy of the trust and the trust reports.[5]
- Upon a request of the beneficiaries provide them with a copy of the trust document. The trustee is able to redact those provisions of the trust document that do not pertain to the beneficiary. However, if a beneficiary request a copy of the non-redacted trust document, then the trustee must provide such copy.[6]
Tax Returns
A trustee also has a responsibility to file a trust income tax return with the Internal Revenue Service and the State of Ohio. A trust must file Form 1041 by the fifteenth day of the fourth month after the close of the trust's tax year. For example, for a trust with a tax year ending December 31, the due date is April 15 of the following year. A trust with a tax year that ends June 30 must file by October 15 of the same year.
A trustee has many important duties and it is important that a trustee takes their fiduciary role seriously.
If you have any questions about your role as a trustee please contact our office and we would be happy to speak with you
[1] O.R.C. 5808.01
[2] O.R.C. 5808.09
[3] O.R.C. 5808.10
[4] O.R.C. 5808.13 (B)(2)
[5] O.R.C. 5808.13 (B)(3)
[6] O.R.C. 5808.13(B)(1)
