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How to prove you’ve upheld your fiduciary duty as trustee

On Behalf of | Dec 14, 2020 | Trust & Estate Litigation

As a trustee, your job is to manage the assets in a trust and cooperate with beneficiaries when they make appropriate requests for trust assets. You may need to protect and maintain physical assets or make smart decisions about selling and investing financial assets on behalf of the trust.

If you deny someone resources or if economic circumstances diminish some of a trust’s holdings, the beneficiaries might get upset and start to blame you. In some cases, family members of the person who created the trust or the trust beneficiaries might try to take legal action against the trustee managing the trust and its assets.

Such a challenge might mean that you have to step down from your position as trustee. Legal action could also result in financial or legal vulnerabilities if you haven’t protected yourself. How do you push back against claims of inappropriate behavior as a trustee?

Ensure that you understand your obligations and fiduciary duty

As a trustee, you have a legal obligation to put the needs of the trust and its beneficiaries above your own interests when making decisions about the trust. That obligation is also known as fiduciary duty, and it is important for you to uphold that duty.

Getting advice before you take any action as a trustee so that you understand your obligations can protect you. So can reviewing the trust documentation closely to ensure that you understand the language and fulfill all of the requirements posed to you as the trustee.

Keep careful records of all trust-related business

Depending on the nature of the trust and the types of assets used to fund it, you might have to engage in investment decision-making or real estate transactions. Potential losses in these endeavors could incentivize others to challenge you.

Recording all financial transactions that use trust assets is of the utmost importance, whether you make the sale of physical assets to procure cash or invest trust resources. Those records will help show that you made responsible decisions and fulfilled your obligations. They should also demonstrate that all transactions and disbursements are in compliance with the terms set in the original trust documents. The records you keep will likely play a major role during any trust litigation that occurs.