Trustee Duties Under Pennsylvania Law
Family Law
A trustee has a fiduciary duty to act in the best interests of the trust’s beneficiaries. This duty is codified into law because of how important it is. When you designate a trustee for your family trust, you need to understand the obligations and expectations involved. The trustee must be someone who is honest and responsible because they will be the caretakers of your property.
Under the Pennsylvania Uniform Trust Act, there are specific requirements for the trustee. Whether you are designating a trustee or have just chosen a trustee, an experienced Pennsylvania trust lawyer can help you understand what this position entails. We can also serve as your trustee, ensuring your estate and loved ones are protected.
What Is a Trustee?
A trustee is the individual or institution responsible for managing the assets held in a trust. The trustee carries out the instructions in the trust document for the benefit of the trust’s beneficiaries.
20 Pa.C.S. § 7771 governs the many duties of trustees. At their heart, trustees are fiduciaries. This essentially means that they must always act in good faith, with loyalty, and in the best interests of the beneficiaries.
Core Trustee Responsibilities in PA: What You Need To Know
In the Pennsylvania Uniform Trust Act, the law outlines trustee responsibilities. As a part of your estate and trust planning process in PA, you should familiarize yourself with the duties and expectations of a trustee.
1. Duty of Loyalty
A trustee must administer the trust solely in the interests of the beneficiaries, according to 20 Pa.C.S. § 7772. Self-dealing, conflicts of interest, or using trust property for personal gain are strictly prohibited.
2. Duty of Prudence
Trustees must manage trust property with care, skill, and caution. Pennsylvania follows the Prudent Investor Rule (20 Pa.C.S. § 7203), requiring trustees to invest assets as a prudent investor would. In essence, this means that the trustee must balance risk and return while considering the trust’s purposes and beneficiaries’ needs.
3. Duty of Impartiality
When a trust has multiple beneficiaries, the trustee must act impartially and give due regard to each beneficiary’s interests. Under 20 Pa.C.S. § 7773, favoritism is not permitted.
4. Duty To Inform and Report
According to 20 Pa.C.S. § 7780.3, trustees must keep beneficiaries reasonably informed about trust administration and provide annual reports of trust activity. The only exception is if the beneficiaries have waived this obligation. When the trustee reports to the beneficiaries, they must disclose significant transactions and provide access to trust records upon request.
5. Duty To Administer the Trust According to Its Terms
Thanks to 20 Pa.C.S. § 7771, trustees are legally bound to follow the instructions set out in the trust document. In order to deviate from the terms of the trust, the trustee requires court approval. Any deviations without proper approval can expose the trustee to potential liability concerns.
6. Duty To Collect and Protect Property
Trustees must take control of and safeguard trust assets promptly, according to 20 Pa.C.S. § 7780.2. This may involve securing real estate, consolidating financial accounts, or maintaining insurance coverage.
7. Duty To Enforce and Defend Claims
Trustees in Pennsylvania also have a duty to enforce claims in favor of the trust. They must defend it against any actions that could harm it.
8. Duty To Keep Records
Trustees are required to keep accurate records. For example, they must keep a careful record of all disbursements, transactions, and receipts.
What Happens If a Trustee Doesn’t Fulfill Their Legal Duties?
If a trustee doesn’t fulfill all of their legal duties, it is considered a breach of duty. Under Pennsylvania law, the state can take action in a few important ways.
- Compel the trustee to account for their actions.
- Remove the trustee from their position.
- Order repayment of any improperly used funds
- Award damages for losses to the trust.
The legal and financial consequences of trustee mismanagement can be significant for the trustee. If you are a trustee and think you may have failed at your legal duties, you should seek legal help right away to improve your legal compliance and to understand what your consequences might be.
How the Clause Legal Group Can Help You Choose a Trustee
A trustee is a necessity for your estate plan, but choosing a trustee can be intimidating. There are complex investments, tax issues, family conflicts, and legal obligations to consider. At the Clause Legal Group, we can help you prepare your trust and will. Our legal experts can also serve as the trustee, ensuring your trust is in legal compliance.
From preparing reports to managing disputes, we can help with all aspects of your estate planning and trust management. To learn more, reach out to our top-rated legal attorneys today.
