Enlisting help can ease burden of trustee duties

A trust is established to hold assets such as property, cash, stocks or bonds for beneficiaries. Trustees are responsible for managing the assets according to the terms outlined in the trust.

While that duty may seem simple on the surface, it can be quite complex, especially given the wide choice of investments, the responsibilities imposed by trust law, the ever-changing tax code and the abundance of paperwork involved in managing a trust.

While the responsibilities can be overwhelming, there are three parties that can be enlisted for help: a custodian, a managing agent or a professional co-trustee.

Custodians and paperwork

Hiring a custodian may be a good idea if you are primarily seeking help managing the paperwork involved with a trust. Custodians typically account for the trust’s income and principal, and they help you keep up with tasks such as paying bills.

In addition, a custodian can be helpful in the preparation of annual tax information and in providing monthly account statements. Many custodians also can assist with the buying or selling of securities and collection of dividends.

While a custodian can execute buy-and-sell decisions, it is important to remember that a custodian does not offer investment advice.

Managing agents and investments

Unlike custodians, the primary function of managing agents is to help decide what investments are most appropriate to meet the goals of the trust. Managing agents may be hired either on a discretionary or nondiscretionary basis.

With a discretionary arrangement, you give the agent the authority to make decisions about how to invest the assets in the trust. This can relieve you, as a trustee, from the day-to-day responsibilities of managing the assets.

A nondiscretionary arrangement means that the managing agent will offer advice on how to invest the funds, but the trustee will actually make the final decisions on which investment vehicles to use.

Like a custodian, managing agents also can assist with record-keeping and paying bills, and they can provide monthly account statements. Other services provided by managing agents include collecting and reinvesting dividends as well as capital gains.

Professional co-trustee

A professional co-trustee essentially becomes your partner in administering the trust. The option is usually attractive because it allows you to still be a part of the decisions affecting the assets held in the account, but it removes you from most daily duties of the trust. The terms of the trust, however, must provide for the appointment of a co-trustee.

An important benefit of having a co-trustee is that it adds an impartial third party to the investment decisions.

Having a professional co-trustee can provide the best of both worlds in that it satisfies the need for someone who is attuned to personal family concerns and adds someone who can professionally handle the responsibilities, administration and investment management duties of the trust.

Serving as a trustee can be a very daunting position, and the responsibility of administering a trust fund can be taxing. Naming a custodian, managing agent or professional co-trustee can be helpful, particularly if you don’t have the time it takes to fulfill all the duties entrusted to you.

Timothy M. Reese is senior vice president-investments at A.G. Edwards & Sons. Inc. in Springfield. He may be reached at timothy.reese@agedwards.com.