What is a Trustee in Ontario?
What is a Trustee?
A trustee is a person or organization appointed to manage a trust's assets. The trustor, or person who creates the trust, transfers ownership of their assets to the trustee. The trustee then holds those assets to benefit the trust's beneficiaries.
Trustees have a fiduciary duty to the beneficiaries of the trust. This means that they must act in the best interests of the beneficiaries and must not use their position for personal gain.
Trustees are responsible for managing the trust assets per the document's terms. They must also account for their actions to the beneficiaries of the trust.
Trustees can be either individuals or organizations. Sometimes, the trustor may appoint a professional trustee, such as an attorney or a financial advisor. In other cases, the trustor may nominate a family member or friend as trustee.
What is their role?
The role of a trustee is an important one, and it is essential to choose a trustee who is trustworthy and capable of managing the assets of the trust responsibly.
Trustees are also responsible for keeping accurate records of all trust transactions and filing tax returns on behalf of the trust.
If you are considering becoming a trustee, it is vital to understand the responsibilities and liabilities of the role. You should also have the necessary skills and experience to manage the trust assets effectively.
The duties of a trustee include:
- Holding and managing the trust assets
- Investing the trust assets
- Distributing the trust income to the beneficiaries
- Providing financial reports to the beneficiaries
- Paying the trust's expenses
- Administering the trust according to the terms of the trust document
The powers of a trustee include:
- Managing the trust properly
- Collecting income and paying expenses from the trust property
- Investing the trust assets in any way that the trustee deems appropriate
- Distributing the trust income to the beneficiaries in any way that the trustee deems appropriate
- Making decisions about the trust that are in the best interests of the beneficiaries
- Amending or revoking the trust
- Bringing legal action on behalf of the trust
To become a trustee, you must be a person of good moral character and have the necessary skills and experience to manage the assets of a trust.
Are trustees paid?
Trustees are typically compensated for their services, and the amount of compensation is generally outlined in the trust document.
Examples of compensation can be any of the following:
- A fee based on a percentage of the trust's assets
- A fee based on the amount of work performed
- A combination of both fees
Trustees are essential in ensuring that trusts are managed effectively and per the settlor's wishes. They are responsible for protecting the interests of the beneficiaries and ensuring that the trust's assets are used for their intended purpose. Trustees who fail to fulfill their duties may be liable for breach of trust.
Which type of trustee is better for you?
There are crucial factors to consider when deciding between a professional or friend/family member trustee.
Complexity of your estate:
- Large or complex estates: With significant assets, investments, or businesses, the workload and financial oversight required can be overwhelming for a layperson. Professionals offer expertise in managing these complexities, protecting beneficiaries, and minimizing legal risks.
- Simple estates: If your estate is straightforward, a trusted friend/family member may be suitable, provided they're organized and comfortable with financial matters.
Family dynamics:
- Potential for conflict: If you have a blended family, estranged relatives, or anticipate disagreements about inheritance, a professional can handle distributions objectively and avoid emotional tensions.
- Harmonious family: If your family is close and agrees with your wishes, a trusted individual can administer the estate effectively while adding a personal touch.
Expertise and availability:
- Professional knowledge: Professionals possess experience in legal, accounting, and tax matters involved in estate administration. They stay up-to-date on regulations and ensure the smooth execution of your wishes.
- Personal connection: A chosen friend/family member has intimate knowledge of your values and wishes, offering a familiar and potentially less expensive option. Consider their time availability and financial literacy.
Continuity and succession:
- Professional guarantee: Professionals offer long-term continuity, even if the primary trustee becomes incapacitated. Their companies have established procedures for seamless replacement.
- Individual uncertainty: Friends/family members may become unable or unwilling to serve over time, requiring re-drafting of legal documents and potentially delaying proceedings.
Here are some additional factors to consider:
- Cost: Professional trustees typically charge fees, while friends/family may not. However, efficient management and reduced legal complications can offset professional fees.
- Communication preferences: Consider how beneficiaries feel about dealing with a professional versus a familiar face.
- Personal comfort: Ultimately, choose the option that gives you peace of mind and confidence in your estate's future.
Different types of trusts
There are several types of trusts, each with a unique purpose and structure. Some of the most common types of trusts include:
- Revocable living trusts
- Irrevocable living trusts
- Testamentary trusts
- Spousal trusts
- Charitable trusts
The type of trust right for you will depend on your circumstances and needs. Working with our experienced estate planning attorney is essential to determine which type of trust is best for you.
Conclusion
In conclusion, a trustee is a person or organization appointed to manage and protect the assets of a trust. Trustees have a fiduciary duty to act in the best interests of the trust's beneficiaries. There are many different types of trusts, and the responsibilities and powers of a trustee will vary depending on the kind of trust.
If you are considering creating a trust, speaking with our trusted and expert estate planning attorneys at Tabuchi Law is crucial when discussing your options and ensuring your trust is drafted correctly.
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