What Is a Trustee?
A trustee is an individual or organization appointed to hold and manage the assets of a beneficiary. The trustee is granted legal title of the assets through use of a trust. Trustees are appointed with the expectation that they will manage the assets with the beneficiary’s best interests in mind. There are a number of scenarios in which a trustee might be appointed, such as in the case of retirement planning, bankruptcy, trust funds, charities, and more. The trustee may also be an anonymous LLC.
Role of the Trustee
Every trust requires a trustee. While it is possible that you serve as your own trustee for a revocable trust, generally an anonymous LLC that you own works best for privacy reasons. This way you won’t have to give up control to an outside party.
When a trustee is appointed, he or she has a fiduciary duty to the trust, meaning that they must act in the best interest of the trust and its beneficiaries. The specific duties of the trustee, however, are determined by the trust and the assets that it holds. For example, were a trust made up of different real estate assets, it would be the job of the trustee to oversee the various properties. If the trust were made up of financial assets such as stocks or bonds, then the trustee would be tasked with their financial management.
Apart from the type of asset held in the trust, there may also be special considerations unique to the trust that the trustee must take into account. For example, the trustee must understand the initial trust agreement, including any terms or desires set by the trustor. The trustee is also expected to keep regular communications with the beneficiaries and prepare any necessary records on behalf of the trust, including tax returns and financial statements.
Choosing a Trustee
When it comes to choosing a trustee to manage your trust, it is important that you choose someone with whom you have a good working relationship. The trustee will be tasked with managing your assets, so you will want someone that you trust, is capable of handling the duties, and understands your goals.
In some cases, a potential trustee may worry about accepting the role due to the potential of legal liability. However, realistically, there is very little liability for the trustee unless he or she was to knowingly act in a dishonest or deceitful way. It is mainly the beneficiary that is making the decisions, so they are the ones to bear liability. Also, the trustee can be replaced at any point should the beneficiary decide to do so.
Land Trust Trustee Liability
A land trust is a form of revocable living trust in which the property holder transfers real estate assets to a trustee. With a land trust, the trustee should only act according to the direction given to them from the beneficiary. Doing so will help the trustee avoid any liability issues. A trustee may even require that the trust agreement specifically exempt them from any personal liability related to the debts or other obligations of the land trust. Even if this exemption is expressly stated, however, the trustee may still be found personally liable if they act negligently or act outside the trust agreement.
Benefits of a Land Trust
Just as with all trust types, a land trust must designate a trustee. With a land trust, the trustee holds the title to the real estate assets even though the beneficiary retains all the rights to ownership and managing the property. There are several benefits that a land trust can provide. Here are a few of the main reasons why land trusts are utilized:
Anonymity. When real estate is placed in a land trust, the property must then be listed by the name of the trust. This allows your personal information, such as name, address, and other contact information to be kept out of public records. This anonymity can help reduce your potential for lawsuits, as it obscures knowledge of your overall worth. Apart from this legal protection, anonymity can be beneficial when it comes to additional real estate purchases. Purchasing land outright might cause the price of the property to skyrocket. Using the anonymity of a land trust will help you keep a competitive edge as you grow your assets.
Asset Control. When you place your real estate assets in a land trust you still retain full control over your property. As the beneficiary you will provide your trustee with management decisions regarding the trust. Meanwhile, you retain the full rights to the property, including the ability to develop, rent, or sell it. Additionally, revocable living trusts, such as land trusts, do not have to go through probate when it comes to distributing assets, which is often appreciated by the beneficiaries.