A client sat in my Manhattan office last week, reviewing the final draft of a trust for his two children. He paused when we got to the section naming his brother as trustee. “Russel,” he said, “I trust my brother completely. But how can I be sure he’ll do what’s right for my kids when I’m not here to ask?”
It’s a question I hear often. The answer isn’t found in sentiment or family ties, but in the law itself. When you name someone as a trustee, you aren’t just bestowing an honor—you are placing them in a fiduciary role, one of the most demanding relationships in our legal system. A trustee’s actions are guided not by personal preference, but by a strict set of duties. Stewardship.
Understanding these duties is essential for anyone creating a trust or being asked to serve as a trustee. They are the legal architecture that converts your hope for the future into an enforceable plan.
The Fiduciary Standard: A Higher Duty of Care
The term “fiduciary” is central to these duties. A fiduciary is a person or institution legally bound to act in the best interests of another party—in this case, the trust’s beneficiaries. This is the highest standard of care under the law. It demands more than mere honesty; it requires absolute loyalty and good faith.
A friend might give you well-meaning but poor financial advice with no legal consequence. A trustee who does the same can be held personally liable for any resulting losses. The role is active, not passive. A trustee must manage, protect, and distribute trust assets according to the trust’s terms and the rigorous standards imposed by New York law. These standards are not suggestions; they are mandates enforced by our Surrogate’s Courts.
The Four Core Duties of a Trustee
A trustee’s many responsibilities distill into four fundamental duties. These principles frame every decision a trustee makes.
1. The Duty of Loyalty
This is the bedrock of the fiduciary relationship. A trustee owes an undivided duty of loyalty to the beneficiaries. They must administer the trust solely for the benefit of the beneficiaries and cannot engage in self-dealing or place their own interests ahead of the trust.
In practice, this means a trustee cannot borrow money from the trust, even if they intend to pay it back with interest. They cannot sell a trust-owned property to a family member or their own company for a below-market price. Every transaction must be conducted at arm’s length, free from any conflict of interest. The question is never “Is this a good deal?” but “Is this a good deal for the beneficiaries?” Any hint of personal benefit to the trustee is a red flag and a potential breach of this primary duty.
2. The Duty of Prudence
A trustee must manage the trust’s assets with skill, care, and caution. This isn’t about having a “hot stock tip” or chasing aggressive returns. It is about creating and maintaining a sound investment strategy designed to meet the trust’s specific goals—whether that’s generating income, preserving principal, or achieving long-term growth.
In New York, this duty is codified in the Prudent Investor Act, found in EPTL § 11-2.3. This law requires a trustee to diversify the trust’s investments to manage risk, unless circumstances dictate otherwise. It directs the trustee to consider the portfolio as a whole, evaluating factors like economic conditions, inflation, tax consequences, and the unique needs of the beneficiaries. A trustee who simply deposits all trust funds into a low-yield savings account—or into a single speculative stock—is likely breaching their duty of prudence.
3. The Duty to Account
A trustee does not operate in a vacuum. They have an affirmative duty to keep clear and accurate records of all trust transactions and to keep beneficiaries reasonably informed about the trust and its administration. Transparency is not optional.
Beneficiaries have a legal right to know how their trust is being managed. A trustee must be prepared to provide regular statements and, if requested, a formal accounting that details every dollar that has come into and gone out of the trust. This duty to account is one of the most powerful tools beneficiaries have to ensure the trust is being administered properly. It creates a system of checks and balances that holds the trustee accountable.
4. The Duty of Impartiality
Many trusts have multiple beneficiaries with competing interests. A common example is a trust that provides income to a surviving spouse for their lifetime, with the remaining assets passing to the children upon the spouse’s death. The spouse—the “income beneficiary”—benefits from high-dividend investments, while the children—the “remainder beneficiaries”—might benefit from high-growth assets that pay little income.
A trustee has a duty of impartiality to all beneficiaries. They cannot favor one beneficiary or class of beneficiaries over another. They must balance these competing interests, making decisions that are fair and equitable to everyone involved, both present and future. This requires a sophisticated understanding of both family dynamics and the financial instruments at their disposal.
A Deliberate Choice, Not a Casual Appointment
When my client understood that his brother wouldn’t just be a “helper” but a legally-bound fiduciary, his perspective shifted. The law provides the teeth to ensure a trustee acts as a responsible steward. If they fail, beneficiaries can petition the Surrogate’s Court to compel an accounting, suspend their powers, or even have them removed and surcharged for damages.
Choosing a trustee is one of the most consequential decisions in an estate plan. It requires a thoughtful assessment of a person’s integrity, judgment, and ability to handle the significant legal and financial responsibilities involved. It is a business decision about the stewardship of your legacy.
Before you name a trustee in your own plan, we can conduct a “trustee stress test”—a conversation where we review the specific duties required and analyze potential scenarios your chosen steward might face. This deliberate discussion is a critical part of our process for building a durable and effective estate plan.
