Fiduciary Duties of a Trustee

Not too long ago I was sitting with an elderly client explaining as best I could the choices he would have to make in his estate plan. This particular client chose to pursue a trust-centered estate plan. When it came to the choice of trustee — the individual/entity who manages the property — he asked me what protections existed if the trustee administered the property carelessly, or, even worse, embezzled a portion of the property. My response was simple: “the trustee is a fiduciary, and would have a legal duty to act fairly, responsibly and prudently.” All I got was a silent stare back. He looked at me like I was a science experiment.
Fiduciary is a legal term of art derived from the Latin “fides,” which generally means trustworthiness, reliability or faith. A fiduciary relationship is one wherein one party owes another party a heightened legal duty and has special responsibilities.
Fiduciary relationships exist in several different areas of the law A corporation’s board of directors has a fiduciary duty to its shareholders. The directors have a duty of loyalty to the shareholders and generally have a legal obligation to maximize shareholder wealth. A parent has a fiduciary duty to his/her child, and is under an affirmative obligation to assist his/her child.
Working off of my conversation highlighted above, a trustee of a trust has a fiduciary relationship to the trust’s beneficiaries. A trustee has to work for the benefit of the beneficiary and owes them  heightened care. While the scope of fiduciary obligations of a trustee may range from jurisdiction to jurisdiction, in Missouri the biggest obligations are contained in Missouri Revised Statute Sections 456.8-801-804. Specifically, the trustee has a duty to administer the trust according to the terms of the trust and Missouri law after acceptance. The trustee has a duty of loyalty and impartiality and must administer the trust for the sole benefit of the beneficiaries. And, in terms of care, the trustee must administer the trust as a prudent investor would, exercising the utmost reasonable care, caution, and skill.
Moreover, there are more specific trustee obligations spelled out in Missouri Statute, and inherent in the aforementioned duties. A trustee has a duty not to commingle trust funds with his/her own property. A trustee has a duty to keep a detailed accounting of trust property, and generally must provide notice of the accounting to the settlor of the trust and/or beneficiaries.
So, following the stare my elderly client gave me I explained that there was a plethora of legal obligations imposed upon a trustee. And that his choice of who/what would act as trustee would need to be made carefully so as to avoid a Bernie Madoff situation.

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