Being asked to oversee a family trust is a big deal. Is it an honor? An obligation? A little of both? It’s a huge responsibility, and one you may not feel totally prepared to accept.

Even if you’ve participated in or been exposed to the world of trusts, you may not have the knowledge or skills to be an effective trustee right now. And if you haven’t been included in your family’s in-depth financial discussions before, you might feel completely overwhelmed. Someone obviously thought you were capable, though, or they wouldn’t have selected you as a trustee.

The first step in deciding whether to accept this role is to learn more about what it means to be a trustee, especially in your family.

Understanding Purpose and Mission

Before you agree to become a trustee, it is helpful to understand the original intent and purpose of the trust. Why was the trust created? Who does it benefit? Oftentimes, trusts can accomplish both personal and family goals. Families may establish trusts to manage family business assets or other financial assets, allow for flexibility or future control, tax efficiency, wealth transfer planning, and many other considerations.

Now that you have a better understanding of the trust’s intent, let’s explore trustee responsibilities and obligations.

Fiduciary Responsibilities You’ll Take On

Perhaps the most important aspect of being a trustee is understanding that a trustee must serve as a fiduciary. As a fiduciary, trustees have a loyalty to the grantor and beneficiaries, and they must always act in the best interests of the trust’s beneficiaries above all else. (More on this later on.)

Since some family trusts are designed to serve multiple generations, you’ll need to consider how your decisions will affect not just current but also future beneficiaries, who might not even be alive yet, but their interests are just as important.

Administrative Duties You’ll Manage

Numerous administrative duties go along with overseeing a trust. The trust must file tax returns and provide regular statements to beneficiaries, for example. To fulfill those duties, the trust needs to have thorough and accurate bookkeeping.

Also, depending on the trust, you may have to issue notices, make regular distributions on certain dates, and keep track of age attainments that determine when current or future beneficiaries get certain rights.

Modern trusts sometimes have multiple roles besides trustee, such as a distribution advisor, trust protector, investment manager, and tax advisor. A trustee may have to coordinate with each of these parties.

Failing to meet these administrative obligations or doing them late, can have adverse consequences.

Crucial Decisions You’ll Have to Make

A trustee may need to make numerous decisions that cover a wide range of scenarios. Here are some examples of the type of decisions a trustee may have to deal with.