The Ultimate Guide to Corporate Trustee Duties | RMO Lawyers

Corporate trustee duties are complex and highly scrutinized. Why? When a trust is particularly large or contains a complex mixture of assets and investments, real properties, businesses and the tax considerations that go along with them, a corporate trustee is often appointed instead, or as a co-trustee to a family member successor trustee. Corporate trustees are usually banks, institutions, or trust companies. They have the same fiduciary duties as any other trustee, but are sometimes subject to heightened legal risk. Below, we discuss the many professional obligations and responsibilities of corporate trustees, and some common reasons they are sued and/or removed for breach of fiduciary duty.

FULL ARTICLE: https://rmolawyers.com/ultimat....e-guide-corporate-tr

0:00 Introduction
0:42 What are the legal duties
0:56 Duty of loyalty
1:10 Duty of administration
1:18 Duty to furnish information
1:29 Duty of impartiality
1:37 Duty to enforce and defend claims
1:50 Duty of prudent investment
2:04 Duty to keep trust property separate and maintain adequate records
2:16 Duty to control and protect property
2:26 Duty not to delagate
2:54 What does a corporate trustee do?
3:01 Manage and administer the trust according to its terms and intent.
3:30 Use sophisticated tax-planning strategies to minimize tax liability to beneficiaries and trust accounts
3:54 Make referrals or hire professionals as authorized to perform services required by the trust
4:10 What are some common reasons corporate trustees get sued?
4:20 Mishandling or mismanagement of assets
4:29 Conflicts of interest
4:34 Improper accounting
4:38 Failure to plan taxes advantageously
4:57 Why do corporate trustee get sued?
5:55 Can corporate trustees pay their legal fees out of the trust?

What are the legal duties of a corporate trustee?
While specific corporate trustee laws may vary a bit from state to state, in almost every state, a corporate trustee has the following fiduciary duties to the trust and its beneficiaries:

-Duty of loyalty: a corporate trustee must never place their own self-interest above what is best for the trust and its beneficiaries. They must refrain from self-dealing and disclose and avoid any conflicts of interest.

-Duty of administration: a corporate trustee must administer the trust in accordance with its terms and provisions.

-Duty to furnish information: a corporate trustee must keep all parties to the trust reasonably informed of any material facts regarding its administration and management.

-Duty of impartiality: a corporate trustee must never show preferential treatment to one beneficiary over another.

-Duty to enforce and defend claims: a corporate trustee must defend the trust against any legal action taken against it, and must proactively seek to compensate the trust if another party has wrongfully caused harm or loss.

-Duty of prudent investment: a corporate trustee must make appropriate investment decisions with regard to the trust’s provisions and intent. They must not subject trust assets to undue risk or fail to reinvest and/or diversify as needed.

-Duty to keep trust property separate and maintain adequate records: a corporate trustee must never commingle funds and must always keep a full and up-to-date accounting of trust assets.

-Duty to control and protect property: a corporate trustee must take steps to secure and protect all assets held in the trust.

-Duty not to delegate: a corporate trustee must generally not delegate any tasks to another party if they could perform the task themselves. But note that many states now have laws allowing delegation for certain tasks, such as investment management.

What are some common reasons corporate trustees get sued?
Unfortunately, corporate trustees get sued all the time. Some common claims corporate trustees contend with are:

-Mishandling or mismanagement of assets
-Self-dealing (though note that corporate trustees are generally allowed to invest in allied or proprietary financial instruments from the institution they work for, assuming the investment is prudent and reasonable)
-Conflict of interest
-Failure to diversify investments
-Improper accounting
-Failure to plan taxes advantageously

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We are laser-focused on guiding our trustee, executor, beneficiary, heir, conservator, and guardian clients through some of the most complex and emotionally charged issues life can throw them. Our commitment to helping our clients achieve results that not only add to their bottom line but to their peace of mind is at the core of everything we do. That’s RMO.