Trustee duties in Wyoming: loyalty, impartiality, prudent administration, reporting, and when beneficiaries can direct trustees.
The person responsible for administering a trust is called a trustee. A trustee’s obligations are twofold: He must both uphold the grantor’s intentions and act in the best interests of the beneficiaries as those interests are defined in the trust.
A trustee is bound to carry out the terms of the trust as written. He may use any powers the trust gives him, but he must also perform any duties the trust lays out.
Duties of a Trustee
In addition to any duties the trust gives him, a trustee also has a number of duties imposed upon him by law. These duties are:
- Loyalty – The duty of loyalty means a trustee must act solely in the interest of the beneficiaries when administering the trust. This includes a duty of confidentiality.
- Impartiality – When there are two or more beneficiaries, a trustee must act impartially when investing, managing, and distributing trust property. This does not mean all distributions have to be 100% equal, but it does mean the trustee has to give equal consideration to each beneficiary’s interest.
- Prudent Administration – A trustee must administer the trust as a prudent person would, exercising reasonable care, skill, and caution.
- Recordkeeping – A trustee is expected to keep adequate records of the trust’s administration. This includes properly identifying trust property, keeping on top of title documents, and keeping records of all investments, transactions, distributions, and interests. A trustee must also always keep the trust’s property separate from their own property.
- Informing and Reporting to Beneficiaries – A trustee must keep beneficiaries informed about the administration of the trust and any facts necessary for them to protect their interests. The trustee is also required to provide an annual report to beneficiaries covering the trust property, liabilities, receipts and disbursements, trustee compensation, administrative expenses, and a list of trust assets and their values.
Power of the Grantor and Beneficiaries to Direct the Trustee
Absent a provision in the trust directing them to do so, a trustee has no general obligation to listen to the grantor and the beneficiaries. However, there are situations in which a grantor, a beneficiary, or a third party may direct a trustee to do something, such as:
- Written Directive From Grantor – If the trust is revocable, a grantor can direct the trustee to do something that is not included in the trust itself through a written instruction. However, these instructions cannot contradict the terms of the trust.
- Power of Beneficiaries and Third Parties to Direct – The trust itself may contain provisions conferring the same power to direct the trustee’s actions via written instruction to a beneficiary or third party. The trustee must follow these directions the same as if they were given by the grantor.
- Providing Information to Qualified Beneficiaries – A trustee must provide a copy of the trust instrument to a qualified beneficiary – a beneficiary who currently has either a right to distributions from the trust or a vested interest in the trust assets that is not subject to divestment – upon request. The trustee must also promptly respond to a qualified beneficiary’s request for any information related to the administration of the trust. Please note that beneficiaries under a revocable trust with a living grantor typically do not become qualified beneficiaries until the grantor’s death, as while a trust is revocable, a beneficiary’s interest can be divested by the modification or termination of the trust by the grantor.
Irrevocable Trusts
Many people have concerns about how irrevocable trusts may remove their control over a trustee. While it is true the written directives mentioned above are not allowed for an Irrevocable Trust, the trustee still must follow the trust instrument as written, including any duties given to him. Simply put, the trustee can still be given directives, but the directives must be part of the trust itself.
Even if you want the trustee to have a duty you did not explicitly direct when you first drafted the trust, there is no need to worry. Despite the name, irrevocable trusts can still be changed or even terminated! Modification or termination of an irrevocable trust simply requires a few more steps than would be required for a revocable trust.
Conclusion
The beautiful thing about trusts is that you can add almost any provision you want into your trust, so long as the provision is not illegal, against public policy, or impossible to carry out. If you want your trustee to have more obligations to you and your beneficiaries than the ones in this article, then simply direct your Wyoming Trust Attorney to add the specific legal obligation you wish your trustee to follow.
Here at Wyoming Trust Attorneys, our highly skilled legal team can help you draft whatever trust provisions you need to make sure your trust is administered the way you want it to be. Schedule a consultation with us today!
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FAQs
What core duties does a trustee owe?
Loyalty, impartiality, prudent administration, segregation of trust assets, thorough recordkeeping, and reasonable informing/reporting.
Must a trustee follow grantor directions?
Yes for revocable trusts, if the trust or law allows written directions that don't contradict the instrument. Otherwise, only directions authorized in the document (including powers to direct) are binding.
What must be shared with beneficiaries?
Qualified beneficiaries are entitled to material information about administration and periodic reports sufficient to protect their interests.
Can trustee duties be expanded?
Yes. by drafting explicit obligations or later modifying the trust where permitted (e.g., by consent, decanting, or court order).
Can a trustee delegate tasks?
A trustee may delegate functions that a prudent trustee of comparable skills could properly delegate, but must select and monitor agents prudently and remain accountable for oversight.
What happens if a trustee breaches a duty?
Courts can order remedies such as surcharge (monetary damages), removal, compelling an accounting, or unwinding improper transactions.