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Duties of trustee in Massachusetts

My Uncle has, for some reason, asked me to be the trustee for a trust he is creating. He says he trusts me and believes I can do the job after he's gone. He's concerned because his kids have a history of not getting along. The problem is, I don't really know his children, my cousins, too well and worry about the responsibilities involved with the job. I believe my uncle has some money, but I don't know how much. Can you give a brief run-down of what I might be getting myself into? Thank you.

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You are wise to be concerned:  Trustees in Massachusetts owe strict fiduciary duties to the beneficiaries of the trust and, in some cases, can incur personal liability for breaching fiduciary duties.  The job can become much more difficult when the trustee has to deal with contentious or difficult beneficiaries. As an aside, you shouldn't feel too bad about passing on the job.  Your uncle can hire an attorney or an institution to act as his trustee.  That approach is fairly common. To your question, in a nutshell, a trustee has a fiduciary duty to treat all the beneficiaries fairly and equally, and never put his interests ahead of those of the beneficiaries.  For example, the trustee should never profit from his position (beyond authorized payment stipulated in the trust document) by investing in his own business with trust funds.   Here is an incomplete summary of a trustee's obligations:

A Trustee must obey the terms of the trust.  Very simple: if the trust says the trustee should do something, then the the trustee should do it.  In some cases, trustee can exercise discretion, but must not ignore clear directives.

A Trustee must keep accurate records and, at times specified by law, in the trust, or demanded by beneficiaries, produce an accounting for the trust of financial activity and assets.   Trustees are also required to prepare inventories of trust assets.

A Trustee must safeguard the Trust assets.  In other words, even though the assets do not belong to the trustee, she must guard them as would a reasonable and cautious person (as though you were protecting your owns assets).  So, for example, the trustee should maintain insurance on real estate held by the trust and must invest trust assets as a reasonable and prudent person would.  That does not mean every investment must make money, but excessive risk is frowned upon by the courts.  You can read this post regarding the prudent investor rule for trustees.

A Trustee must properly administer the Trust assets.  The trustee should not treat the assets as though he owns them: no co-mingling trust funds with his own and no putting funds or accounts in his own name.  Also proper administration means the trustee should file all tax returns and pay taxes in a timely manner AND provide all required tax documentation to the beneficiaries. 

The above is just a summary of the main duties.  If I were you, before I accepted the position as a trustee, I would have an attorney sit down with me and advise me on my general obligations under Massachusetts law and on any obligations that are specific to the trust in question.  Your uncle should be willing to pick up the tab.  Good luck.


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