Trustee Duties Part 2: Follow the Trust Instrument

/ January 2, 2011

The duty to follow the written trust instrument is fundamental to a successful trusteeship. This duty requires a trustee to, “carry out the directions of the testator or the settlor as expressed in the terms of the trust.”[1] If a trustee’s actions are questioned, a court will look to the trust instrument when assessing whether a trustee has violated his fiduciary duty. The trust instrument is so important that absent a conflict with public policy or state statute, a trust instrument is the primary source for determining a trustee’s responsibilities and powers.

When creating a trust, it is important for the settlor to understand the significance of delegating powers and duties to a trustee. In all cases, very specific, unambiguous instructions are necessary to set for the settlor’s wishes. These instructions cover a variety of topics, including when and how the trustee shall receive, hold and transfer assets; requirements and restrictions (if any) to make distributions of either income or principal to beneficiaries of the trust; investment and gifting strategies; and payment of relevant taxes.

Before the trustee assumes the position, it is necessary for the trustee to affirmatively accept the role of trustee. In every case, it is absolutely essential that the trustee reviews the trust instrument and understands every requirement along with the general intent of the trust. This will ensure that the trustee can in fact follow the instructions and carry out the provisions in the trust instrument. An individual named as trustee does not have to accept the role but he or she must properly communicate the non-acceptance (as dictated in the trust instrument) to the previous trustee, beneficiaries, or other individuals interested in the administration of the trust.

[1] This quote comes from Bogert’s Trusts and Trustees, Chapter 26 § 541 p.1 – a treatise on trusts.