It is essential that a trustee exercise an extreme amount of caution when dealing with the trust and its assets. The personal duties of a trustee start with the most important: never, ever, under any circumstances commingle estate funds with the trustee’s personal funds. This is an essential component of the duty to avoid a conflict of interest. A trustee must be aware of and avoid any situation that creates a conflict of interest with the terms of the trust and the duties of the trustee.
A conflict of interest can arise under a variety of circumstances. For instance, if the trustee stands to personally profit from the trust or is also a beneficiary, it can be tempting to handle the trust assets in such a way that their interests carry more weight than the other beneficiaries’. Breaches of this duty often happen in family designations when parents appoint a child as trustee.
The trustee also has a duty to use her skills in administering the trust. For instance, a CPA, lawyer or investment banker must use that specialized knowledge. When duties are delegated, the trustee retains ultimate responsibility. It is essential that a trustee diligently monitor the performance of those hired to manage different aspects of the trust. For instance, they must monitor the performance of an investment portfolio to make sure investors aren’t excessively day trading. Likewise, they should periodically inspect real estate to ensure property managers are doing their jobs.
