A trustee of a will is the person or institution that manages assets held in a trust created by someone’s will, administering those assets for the named beneficiaries after the will-maker dies. The trustee holds legal title to the property, follows the instructions the will lays out, and can be held personally liable for losses caused by mismanagement. The role often lasts years, sometimes decades, and it’s a different job from being the executor of the estate.
How a Will Creates a Trust
Not every will creates a trust. One only exists when the will directs that certain assets be held and managed over time rather than handed out immediately. Because this kind of trust is born from the will and only takes effect at death, it’s called a testamentary trust.
Testamentary trusts show up when outright distribution doesn’t make sense. A parent might create one to provide for minor children until they reach adulthood, or to protect a beneficiary with special needs whose eligibility for government benefits would be jeopardized by a lump sum. Staggered distributions are another common setup, with a beneficiary receiving a third of the trust at 25, another third at 30, and the remainder at 35. The trustee manages the assets across that entire window.
The trust doesn’t exist while the will-maker is alive. Once the will goes through probate, the executor transfers the designated assets into the trust, and the trustee’s work begins.
Trustee vs. Executor
People mix these up constantly, and the difference matters.
An executor (sometimes called a personal representative) handles the overall estate settlement: filing the will with the probate court, notifying creditors, paying debts and taxes, and distributing what remains to beneficiaries. Once those tasks are done and the court issues a release, the executor’s job is finished. Most estates wrap up within one to two years.
A trustee’s job starts where the executor’s ends. When the executor transfers assets into the testamentary trust, the trustee takes over and manages them according to the trust’s terms. That can mean investing the money, making periodic distributions, filing annual tax returns, and keeping detailed records. The commitment can easily run a decade or longer, depending on when the trust is set to terminate.
One person can serve as both executor and trustee of the same estate, and it’s not unusual. But the two roles carry different obligations and different timelines.
Core Duties of a Will Trustee
Everything a trustee does flows from a fiduciary duty to the beneficiaries. That duty has teeth. It requires the trustee to act solely in the beneficiaries’ interest, with honesty, loyalty, and reasonable care. A trustee who uses trust assets for personal benefit, even in good faith and at fair market value, can have that transaction voided entirely. Courts don’t ask whether the deal was fair. If the trustee was on both sides of it, the transaction is presumed tainted.
Investing Trust Assets
A trustee must invest trust assets the way a careful, informed investor would, considering the trust’s specific goals, the beneficiaries’ needs, and the overall risk profile of the portfolio. This standard, known as the prudent investor rule and adopted in some form by the vast majority of states, evaluates each investment as part of the whole portfolio rather than in isolation. A single risky stock isn’t necessarily a problem if it’s balanced by more conservative holdings elsewhere.
The trustee must also make a reasonable effort to diversify unless circumstances make concentration more appropriate. A trustee with professional investment expertise is held to a higher standard than a family member with no financial background. The will can expand, restrict, or override these investment rules, so the trust’s specific terms always come first.1Municipality of Anchorage. Uniform Prudent Investor Act of 1994
Distributing Income and Principal
The will’s trust provisions dictate when and how much beneficiaries receive. Some trusts give the trustee broad discretion to distribute funds based on a beneficiary’s needs for health, education, maintenance, and support. Others set rigid schedules tied to specific ages or milestones. Whatever framework the will establishes, the trustee must follow it. Failing to make required distributions on time is itself a breach of duty.
Recordkeeping and Communication
Trustees have to keep thorough financial records of every transaction involving trust assets, including receipts, bank statements, investment activity, and tax documents. Most states require trustees to provide beneficiaries with regular accountings showing what the trust owns, what it earned, what was spent, and what was distributed. Beneficiaries kept in the dark have grounds to take legal action, and courts take transparency failures seriously.
Duty of Impartiality
When a trust has multiple beneficiaries, the trustee cannot favor one over another unless the trust’s terms explicitly allow it. This matters most when current beneficiaries who want income now and future beneficiaries who benefit from growth have competing interests. Balancing both is one of the harder judgment calls in trust administration.
Who Can Serve as Trustee
Any adult of sound mind can serve. Beyond that baseline, the choice is wide open. Common picks include a spouse, adult child, sibling, close friend, attorney, or accountant.
Corporate trustees, typically banks and trust companies, bring professional investment management and continuity. A bank won’t die, become incapacitated, or move across the country. The tradeoff is cost and a sometimes impersonal approach to beneficiary relationships. Corporate trustees charge annual fees, commonly ranging from about 0.5% to 2% of the trust’s assets, and may impose minimum asset thresholds.
A beneficiary can also be the trustee, but that creates obvious tension. Someone distributing trust funds to themselves invites scrutiny over whether those decisions truly serve the trust’s purposes. When a beneficiary serves as trustee, limiting their distribution power to an objective standard like health, education, and support reduces the conflict. Adding at least one independent co-trustee is even better.
Co-Trustees
A will can name two or more people to serve together. Under the trust laws adopted in most states, co-trustees who can’t reach a unanimous decision may act by majority vote, though the trust’s own terms can override this default. Two co-trustees must agree unanimously, since there’s no majority possible with just two people. Co-trustee arrangements work best when the individuals have complementary skills, such as one with financial expertise and another who knows the beneficiaries’ personal circumstances. They work poorly when the co-trustees have a strained relationship, because deadlocked decision-making can paralyze the trust.
How a Trustee Gets Appointed
The person writing the will names the trustee directly. A well-drafted will also names one or more successor trustees to step in if the first choice can’t or won’t serve. This kind of backup planning prevents gaps in management and avoids the expense of going to court.
If the will doesn’t name a trustee, the named person declines, or a vacancy opens up later, the probate court appoints someone. Courts generally look for a person or institution that will serve the beneficiaries’ interests, and they’ll consider the preferences of the beneficiaries themselves if those beneficiaries are old enough to weigh in. A trust won’t fail just because nobody is immediately available to run it.
Whoever is named must voluntarily accept the role. No one can be forced to serve as trustee. Acceptance is usually formalized in writing, and once a trustee accepts, stepping away requires either court approval or the consent of all beneficiaries.
Trustee Compensation
Trustees are entitled to be paid. If the will specifies a fee, that amount controls unless it turns out to be unreasonably high or low given the actual work. When the will is silent, the trustee receives whatever amount is reasonable under the circumstances.
Reasonable depends on the size and complexity of the trust, the trustee’s skill level, the time required, and local norms. Individual trustees serving in a personal capacity often receive between 0.5% and 2% of the trust’s asset value annually, though this varies widely. Professional trustees and corporate trustees typically charge on a published fee schedule. The trust also reimburses the trustee for legitimate out-of-pocket expenses such as accounting fees, legal consultations, and tax preparation.
Many family trustees feel awkward charging to manage a loved one’s trust. But trust administration is real work with real liability, and taking compensation is both legal and expected. Declining payment doesn’t reduce the legal standard of care the trustee must meet.
Tax Obligations
A testamentary trust is its own taxpayer, separate from both the deceased person’s estate and the beneficiaries. The trustee has to obtain a federal Employer Identification Number for the trust, which can be done online through the IRS at no cost.2Internal Revenue Service. Get an Employer Identification Number
If the trust earns $600 or more in gross income during the year, or has any taxable income at all, the trustee files Form 1041, the federal income tax return for estates and trusts.3Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 Income the trust distributes to beneficiaries is generally reported on the beneficiaries’ personal returns via Schedule K-1, while income the trust retains is taxed at the trust level.
Trust tax brackets are notoriously compressed. An individual doesn’t hit the top federal income tax bracket until income is well into six figures, but a trust reaches the highest marginal rate at only a few thousand dollars of retained income. The compression gives trustees a strong incentive to distribute income rather than accumulate it inside the trust, whenever the trust terms allow. State income taxes on trusts add another layer of complexity depending on where the trust is administered.
Personal Liability for Mistakes
This is the part that should make every potential trustee pause before accepting. A trustee who breaches their fiduciary duty is personally liable to the beneficiaries for the resulting losses. A court can order the trustee to pay out of their own pocket to make the beneficiaries whole.
The legal term for this remedy is a surcharge, and courts impose it for a wide range of failures:
- Bad investments, including negligent oversight of trust assets, failing to diversify, or speculating with trust money
- Self-dealing, such as using trust property for personal benefit or transferring assets to family members without beneficiary approval
- Missed distributions, meaning failing to pay beneficiaries what the trust requires, when it requires it
- Ignoring the trust terms by deviating from the will’s instructions on how assets should be managed or distributed
- Excessive delay in administering the trust given the complexity of the assets involved
Good faith alone isn’t a defense. A trustee who tries their best but makes poor investment decisions without exercising reasonable care can still be surcharged. The standard is objective: what would a reasonably prudent person have done in the same situation?1Municipality of Anchorage. Uniform Prudent Investor Act of 1994
Some courts may require trustees to post a surety bond to protect beneficiaries from potential losses. The trust usually pays for it.
Changing or Removing a Trustee
A trustee can leave the role voluntarily by resigning, though resignation usually requires either court approval or the consent of all beneficiaries. The trust itself may include its own resignation procedures. A trustee can’t simply walk away without ensuring the trust assets are properly handed off to a successor.
When a trustee won’t leave voluntarily but is doing a poor job, beneficiaries can petition the court for removal. Courts will remove a trustee on several grounds:
- A serious breach of trust, such as mismanaging investments, commingling personal and trust funds, or self-dealing
- Incapacity, meaning physical or mental inability to carry out trustee duties
- Persistent failure to communicate, including refusing to provide accountings or respond to legitimate beneficiary inquiries
- Hostility among co-trustees severe enough to impair the trust’s administration
- General unfitness or unwillingness to administer the trust effectively
Courts don’t remove trustees over minor disagreements or because beneficiaries dislike the trustee’s investment choices. The bar is misconduct, neglect, or inability to serve.
When the Role Ends
A testamentary trust doesn’t last forever. It terminates when the conditions specified in the will are met, and the trustee’s job ends with it. Common triggering events include a beneficiary reaching a specified age, graduating from college, or the death of the last income beneficiary. A trust for minor children, for example, often terminates when the youngest child turns 25 or 30.
At termination, the trustee prepares a final accounting of all trust assets and transactions, files a final Form 1041 tax return, distributes the remaining assets to whoever the will designates, and obtains receipts or releases from the beneficiaries acknowledging they received their share.3Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1
A trust can sometimes end early. If all beneficiaries agree and the trust’s purposes have been fulfilled, they can petition the court to wind it down ahead of schedule. Courts have discretion and will weigh whether early termination conflicts with what the will-maker intended. A trust specifically designed to protect a young beneficiary from receiving too much money too soon is unlikely to be cut short just because that beneficiary wants the cash now.