North Carolina residents named as a trustee might wonder what their duties and responsibilities are. While they do not have to be a financial expert, they do need to manage the trust effectively. This may include making new investments to increase the value of the trust or selling some assets to cover expenses. The trustee may work with a financial professional in making these decisions, but it is still a good idea to have a document that explains the investment strategy in case a beneficiary queries it.
A trustee also has a responsibility to file the trust’s income tax return each year. Failure to do so could result in the trustee being held responsible for any penalties or fees. Trustees must also prepare an income tax statement known as a Schedule K-1 each year for beneficiaries.
Distributions from trusts might happen in a number of different ways. With some trusts, people might receive the income at one point in their life and then the principal at another time. A trustee may be instructed as to when distributions should be made, or the distributions might be at their discretion.
People who learn that they have been appointed the trustee of a trust might want to discuss trust administration issues with an attorney. Furthermore, settlors may want to think carefully about the duties of the trustee so that they choose the right person for the task. For example, trustees who are going to be responsible for deciding when beneficiaries receive distributions need to be able to follow the wishes of the settlor and deal with any conflict that arises with beneficiaries as a result.
