Probate & Trust Law Section Conference Manual ... - Minnesota CLE

VII. Duty to keep records and provide reports. The trustee is required to keep accurate
records and, as previously mentioned, provide beneficiaries with trust accountings
which show, among other things, additions, deductions, and the value of trust
assets.
VIII. Duty to identify and segregate trust property. This duty charges the trustee with
keeping trust property separate from the trustee’s own property, as well as from
property not subject to the trust. This may require setting up separate accounts or
physically keeping the assets separate and distinct, and this prohibition against
commingling also applies if more than one trust is being administered. The trustee
is also required to title trust assets appropriately to avoid any ownership disputes.
Given all of the duties that the trustee assumes, careful consideration must be given to
who serves in that role. In theory, the trustee is someone who will be responsible for
the management of trust assets and the formal administrative duties which go along
with the day-to-day operation of the trust. However, in reality, the trustee is also
responsible for managing the complex relationships and interactions among family
members and others.
Clients will often want to name family members or trusted advisers as their trustee.
Sometimes they may want to name such individuals to serve along with a professional
fiduciary. By dividing the role between individuals and professional trustees, the roles
and responsibilities can be divided based upon the experience, time, knowledge and
capabilities of the individuals named. More trustees, however, may result in more
complexity. Where family involvement through the use of individual trustees is being
considered, the education of family members and their advisers is a crucial factor in the
process and ultimate success of the arrangement.
Where more than one trustee is named, the trust instrument should specify how the
trustees will work together, and some of the more important issues to address include:
--how decisions get made, whether by unanimity, by majority or with control in one of
the trustees;
--delegation of responsibility and authority among co-trustees;
--exoneration of “nonparticipating” trustees and other limitations on trustee liability;
--trustee resignation, removal and incapacity and transition on change of trustees;
--appointment of trustees for newly created trusts;
--responsibility for assets (particularly special assets, like closely-held businesses, etc.),
records and reports; and
--compensation of trustees and their agents.
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