One of the most common questions I hear when clients are creating a trust is:
“What is the role of a trustee?”
And the follow-up question is usually:
“What is a trustee actually supposed to do?”
The short answer is this:
A trustee is the person or institution legally responsible for administering the trust according to the trust document and applicable law.
In plain English, the trustee is not just a name on paper.
The trustee is the person who holds, manages, protects, and administers trust property for the benefit of the beneficiaries.
That means the trustee must follow the written trust agreement, act in the beneficiaries’ best interests, keep proper records, protect trust property, avoid conflicts of interest, and make distributions only as allowed by the trust.
Under trust law, a trustee generally must administer the trust in good faith and in accordance with the trust’s terms and purposes. The Uniform Trust Code also states that a trustee must administer a trust as a prudent person would, using reasonable care, skill, and caution. (uniformlaws.org)
So while the trustee does not have to be perfect, the trustee does have to be responsible.
So, Daphné, what does a trustee do?
A trustee’s role depends on the trust document, the assets owned by the trust, and the applicable state law. But in general, a trustee is responsible for:
Following the trust document;
Acting loyally and prudently for the beneficiaries;
Holding and protecting trust assets;
Keeping records of trust property, decisions, distributions, tax documents, and major transactions;
Keeping trust property separate from personal property;
Coordinating with attorneys, CPAs, registered agents, and financial advisors;
Signing documents on behalf of the trust when needed;
Making or approving trust-level decisions;
Communicating with beneficiaries when required;
Avoiding conflicts of interest; and
Distributing assets only as permitted by the trust.
Many states have adopted versions of the Uniform Trust Code, which includes core fiduciary duties such as the duty to administer the trust, the duty of loyalty, the duty of prudent administration, the duty to keep adequate records, and the duty to inform and report to beneficiaries. (law.lis.virginia.gov)
What if the trust owns a business?
This is where many clients get confused.
If a trust owns a holding company, and that holding company owns an operating business, the trustee usually does not run the day-to-day business.
For example, let's look at a successful leader's typical layering structure:
Trust → Holding Company → Operating Company
In that structure, the operating company’s manager may continue handling daily business operations.
The trustee’s role is different.
The trustee is responsible at the ownership level.
That may include making sure the trust’s ownership interest is properly documented, protected, and administered. The trustee may also need to sign trust-level documents, approve ownership-level decisions, coordinate with professionals, and ensure the trust continues to operate according to its purpose.
So if the holding company owns a business, the trustee is not automatically the person answering phones, managing employees, serving customers, or running daily operations.
Instead, the trustee oversees the trust’s ownership interest and makes sure the trust is being administered properly.
How do you select a trustee?
A good trustee should be someone who is:
Responsible;
Organized;
Financially literate;
Comfortable signing legal and financial documents;
Willing to keep records;
Able to communicate with professionals;
Independent enough to preserve legal separation; and
Willing to understand the fiduciary role.
This is not just about choosing someone you love.
It is about choosing someone who can actually do the job.
Family trustee vs. corporate trustee
There are two common options: an individual trustee or a corporate trustee.
An individual trustee is usually a person, often a family member, trusted friend, advisor, or other individual.
A corporate trustee is typically a trust company, bank trust department, or professional fiduciary institution.
Here is the practical difference, applied to real life (no sugarcoating).
My general view is:
Family first, when family is competent.
Why?
Because what money cannot buy is deep relationship, personal history, and genuine care.
A capable family member may understand the people, the purpose, and the family dynamics better than any institution ever could.
But family is not always the right answer.
If there is no appropriate family member, if the family member is disorganized, financially inexperienced, conflicted, unreliable, or likely to create disputes, then a trust company can be a very normal and responsible way to move forward.
The goal is not to choose the person who feels most sentimental.
The goal is to choose the person or institution most likely to protect the trust, follow the instructions, and serve the beneficiaries well.
The bottom line
A trustee is the legal steward of the trust.
The trustee’s job is to follow the trust document, protect the assets, act in the beneficiaries’ best interests, keep records, avoid conflicts, coordinate with professionals, and make trust-level decisions when needed.
In a legacy protection structure, the trustee usually does not run the operating business day to day. The trustee oversees the trust’s ownership role, while the business manager handles operations.
The right trustee should be trustworthy, competent, organized, and willing to take the responsibility seriously.
If you are deciding who should serve as trustee, the best choice is not always the most obvious one.
It is the person or institution that can carry out the role with care, consistency, and integrity.
If you would like help thinking through who should serve as trustee in your structure, we can walk through the options together.
Book a chat with me here - https://ro.am/PierreLLC/mylegacygc
Cheers,
Daphné