Most people hear the word “trustee” and have a distinct image in their minds. It could be their closest sibling, their eldest child or a trusted attorney. The image is clear but different from person to person.
However, many adults do not know what the duties of a trustee are nor how they differ from a fiduciary. Is there even a difference between a trustee and a fiduciary? It’s actually easy for planners to tell the difference and the best use of each.
Fiduciaries are a person or organization that acts on behalf of another person, often putting that person’s interests and benefits ahead of their own. The fiduciary may be responsible for different aspects of an estate plan.
For example, a child’s legal guardian is fiduciary on behalf of the child because the guardian acts in the child’s best interests and makes decisions for them. The same is true for any bankers, accountants, advisors or executors you bring into your estate plan. It’s more of a catchall term for people who represent your interests when you are not able to.
A trustee is a type of fiduciary relationship because you select a representative to act in your interest and manage over a specific trust. The exact duties of the trustee may differ depending on the trust you develop. For example, a successor trust requires the trustee to take over management of trust for the grantor in the event they are mentally incompetent or dies.
Selecting a trustee is a huge decision in an estate plan because you need to be able to trust that person or organization to represent your ideas in a very specific way. You also want to ensure that the trustee upholds the fiduciary aspects of that role, so work with whomever you select to help them understand what you want from your trust.