Serving as a trustee involves much more than simply holding or distributing trust assets. A trustee is a fiduciary and is responsible for administering the trust for the benefit of the beneficiaries and in accordance with the terms of the trust.
The Oklahoma Uniform Trust Code (“OUTC”) sets out a number of specific duties that apply to trustees. Although the particular terms of the trust are always important, the following are some of the principal duties an Oklahoma trustee should understand.
1. Administer the Trust in Good Faith
A trustee’s most basic responsibility is to administer the trust in good faith and in accordance with its terms and purposes, the interests of the beneficiaries, and Oklahoma law.
In practical terms, the trustee should first look to the trust document. The trustee does not have the authority to simply disregard the settlor’s instructions or administer the trust according to what the trustee personally believes would be better.
2. Act Loyally for the Beneficiaries
A trustee owes a duty of loyalty to the beneficiaries.
Generally, this means the trustee must administer the trust for the beneficiaries rather than using the trustee’s position to obtain an improper personal benefit. Transactions involving conflicts of interest or self-dealing deserve particular scrutiny.
3. Treat Beneficiaries Impartially
When a trust has two or more beneficiaries, a trustee has a duty to act impartially, giving appropriate consideration to their respective interests.
Impartiality does not necessarily mean that every beneficiary must receive exactly the same treatment. The terms of the trust may give different beneficiaries different rights. Rather, the trustee should fairly consider each beneficiary’s rights and interests under the trust and should not improperly favor one beneficiary over another.
4. Administer the Trust Prudently
A trustee must administer the trust as a prudent person would under the circumstances.
The trustee should consider the purposes and terms of the trust, its distribution requirements, the nature of the trust property, and other relevant circumstances. The trustee is expected to exercise reasonable care, skill, and caution in making decisions involving trust property.
5. Keep Trust Expenses Reasonable
Trustees are often required to incur expenses for attorneys, accountants, investment advisers, property managers, appraisers, tax preparation, maintenance, and other services.
However, the trustee has a duty to incur only expenses that are reasonable in relation to the trust property, the purposes of the trust, and the circumstances of the administration.
6. Use Any Special Skills or Expertise
If a trustee has special skills or expertise—or was selected as trustee because of those skills or expertise—the trustee is expected to use them in administering the trust.
This can be especially important when a professional, financial adviser, attorney, accountant, or other person with specialized knowledge serves as trustee.
7. Carefully Supervise Delegated Responsibilities
A trustee does not necessarily have to personally perform every function involved in administering a trust. Trustees frequently employ investment advisers, accountants, lawyers, property managers, and other professionals.
When delegating responsibilities, however, the trustee must exercise appropriate care in selecting the person, establishing the scope of the delegation, and periodically reviewing the person’s performance.
8. Take Control of and Protect Trust Property
A trustee must take reasonable steps to obtain control of and protect trust property.
Depending on the assets involved, this can include securing bank and investment accounts, taking possession of important records, maintaining and insuring real property, safeguarding valuables, collecting income, and otherwise making sure trust property is not lost, wasted, damaged, or improperly transferred.
9. Keep Adequate Records and Keep Trust Property Separate
Good recordkeeping is one of the most important practical responsibilities of a trustee.
The trustee must keep adequate records of the administration of the trust. Trust property should also be kept separate from the trustee’s personal property and appropriately identified as trust property.
Among other things, a trustee should generally be able to document:
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Assets received by the trust;
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Income received;
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Expenses paid;
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Distributions made;
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Investment transactions;
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Trustee compensation;
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Professional fees; and
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Other significant transactions involving trust property.
Poor recordkeeping can make it extremely difficult for a trustee to demonstrate that the trust has been properly administered.
10. Enforce Claims and Defend the Trust
A trustee must take reasonable steps to enforce valid claims belonging to the trust and to defend claims asserted against the trust.
That does not mean every dispute requires litigation. It does mean that the trustee should appropriately evaluate claims and protect the trust’s interests rather than simply ignoring them.
11. Collect Trust Property From a Prior Trustee
When a successor trustee takes over, the successor has responsibilities concerning trust property held by the former trustee or others.
The successor trustee should take reasonable steps to obtain possession and control of trust property and, when appropriate, address breaches of trust committed by a predecessor trustee.
12. Keep Beneficiaries Informed and Provide Reports
The OUTC imposes important duties on trustees to provide beneficiaries with information concerning the trust and its administration.
Depending upon the circumstances and the beneficiary involved, this can include keeping beneficiaries reasonably informed, responding to reasonable requests for information, and providing reports concerning trust property, liabilities, receipts, disbursements, and distributions.
For many trustees, communication and accounting are among the most important ways to reduce disagreements with beneficiaries. A beneficiary who receives clear information about what the trustee is doing and why is less likely to assume that something improper is occurring.
13. Properly Exercise the Trustee’s Powers
Oklahoma law gives trustees a number of powers relating to trust administration, and the trust document itself may grant additional powers.
Having a power, however, does not mean the trustee can exercise it without regard to the trustee’s fiduciary duties. Trustee powers must still be exercised consistently with the trust, the beneficiaries’ interests, and the trustee’s duties of loyalty, prudence, impartiality, and good faith.
14. Distribute the Trust Property When the Trust Terminates
When a trust terminates, the trustee generally must proceed appropriately with winding up the trust and distributing the remaining property to the persons entitled to receive it.
The trustee may need to first address final expenses, taxes, claims, professional fees, reserves, or other matters necessary to properly complete the administration.
A trustee should not unnecessarily delay a final distribution, but neither should the trustee distribute all trust property before legitimate remaining obligations have been addressed.
The Trustee’s Role Can Be Summed Up Fairly Simply
Although trust administration can become complicated, the principal responsibilities of an Oklahoma trustee can generally be summarized as follows:
Follow the trust. Protect the trust property. Act loyally and prudently. Treat the beneficiaries fairly. Keep good records. Keep the beneficiaries appropriately informed. Make the required distributions. And be prepared to explain and document how the trust has been administered.
Serving as trustee can be a significant responsibility, particularly when a trust owns real estate, businesses, investment accounts, or other complicated assets, or when disagreements exist among beneficiaries.
A trustee who is uncertain about his or her responsibilities should obtain legal advice before making significant decisions. Likewise, a beneficiary who believes a trust is not being properly administered may have rights under the Oklahoma Uniform Trust Code to obtain information, request an accounting, or seek other appropriate relief.
This article provides general information concerning Oklahoma trust law and is not intended as legal advice regarding any particular trust or situation. Additionally, this article was created with the generous assistance of ChatGPT Plus.
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