A trust helps you determine who receives your assets after your death, ensuring that the intended recipients are given everything you want them to have while avoiding probate and possibly lowering estate taxes. In South Dakota, there are unique laws surrounding trusts that can impact your trustees. It is important to understand these laws and plan accordingly to preserve your assets.
First, you must designate a trustee — the person who will handle your assets in the trust. They are responsible for acting for the beneficiary’s benefit and upholding your wishes for your assets.
If you are planning a trust or have been asked to be a trustee, here is everything you need to know about their duties and responsibilities.
What Does It Mean to Be a Trustee?
A trustee, or fiduciary, oversees a trust, acting like a manager to ensure assets are handled properly until they are given to the beneficiary. They can be appointed for various reasons, such as the case of bankruptcy or after the grantor’s retirement.
Trustees can also be legal firms that have been appointed by an individual to manage their assets. Although the purpose of a trustee is to ensure assets are managed appropriately, disputes can arise. In that case, residents in Sioux Falls can contact trust dispute lawyers at Alvine Law Firm for assistance.
Responsibilities of a Trustee
Being a trustee means that you have the obligation to manage the assets in the trust according to the grantor’s wishes. The trust is a legal agreement where the assets are legally owned by the trustee and managed on the beneficiaries’ behalf. This could be the case for parents of minors whose assets need to be managed until their children reach the South Dakota age of inheritance (18).
A trustee should uphold the grantor’s wishes at all times and only act in the best interest of the beneficiaries. Their responsibilities include:
- Administering the assets in the trust according to its grantor’s established terms.
- Carrying out instructions provided for asset distribution.
- Communicating openly with beneficiaries regarding their inheritance and offering clarity as needed.
- Filing taxes on the trust and managing the account’s finances.
- Ensuring fair and equitable distribution of assets to designated beneficiaries.
Duties of a Trustee
Fiduciaries of living trusts have duties to uphold. Failure to do so can result in trust disputes and legal consequences. These duties are:
Duty of Loyalty
A trustee should only act in the benefit of the beneficiaries and not misappropriate or mishandle assets for their own gain. They are obligated to uphold the wishes of the grantor and only make decisions that align with the well-being of their beneficiaries.
Duty to Preserve Trust Property
Trustees should safeguard any assets in the trust, including finances and real estate. They are responsible for taking appropriate actions to ensure the trust’s property is protected against loss or damages. They may need to take out insurance to protect assets.
Duty of Prudence
As the fiduciary of a trust, someone is obligated to act prudently by considering factors such as risk aversion, diversification, and investment growth. They must also adhere to all laws relating to investment management and act in a way that is beneficial to the investors and beneficiaries.
Duty to Account and Inform
A trustee should maintain accurate and detailed records of all trust transactions and provide this information to the grantor. South Dakota has a “quiet” trust law that means not all trusts need to be disclosed to beneficiaries.
Under South Dakota Codified Law 55-2-13, the fiduciary is not required to disclose the existence of a revocable trust to beneficiaries. In the event the trust becomes irrevocable, such as the grantor’s death, then the trustee must inform beneficiaries within 60 days of the change.
If you are the beneficiary of a revocable trust, you are still entitled to updates upon request (Codified Law 55-1-13). The trustee reserves the right to deny updates to unreasonable requests. If you find yourself in dispute with a trustee in Sioux Falls, contact one of our lawyers for assistance. Book a free consultation.
Trustee’s Authority in South Dakota
Being appointed a trustee grants someone the authority to manage their trust’s assets on their behalf. The trust can give broad discretion or have specific terms and requirements based on the grantor’s preferences.
South Dakota’s Codified Law Title 55 outlines the rights, responsibilities, duties, and limitations of a trustee. Codified Law 55-0-1A highlights the various powers afforded to a trustee upon their appointment. These include:
- The trustee can collect, hold, and retain assets until they deem the appropriate time to disperse them.
- The trustee can hold assets even if they have a personal interest in them.
- The trustee can participate in business operations or enterprise in the trust.
- The trustee can invest and reinvest assets in the trust, regardless of a lack of diversification.
- The trustee can deposit funds in a bank, including one operated by themselves, or in a state or federal savings account or with a loan association.
- The trustee can enter a lease as a lessor or lessee, with or without the option to purchase or renew the property.
- The trustee can raze existing walls, erect new walls or buildings alone or jointly with the owners of adjacent properties.
- The trustee can subdivide, develop, or dedicate land for public use, adjust boundaries, make or maintain a plat of vacation, dedicate easement to public use, and more.
Speaking with an attorney can help you fully understand your rights under South Dakota’s extensive trustee laws.
How Are Trustees Compensated in South Dakota?
Trustees are typically paid out of the trust’s assets. Their compensation is typically laid out in the trust agreement, including the amount, frequency, and timing of payments. Professional trustees are often paid an annual fee, which is typically a flat fee or percentage of the trust’s assets; non-professional fiduciaries can be paid monthly, quarterly, or annually.
The exact nature of the compensation will vary by trust, and it is advised to carefully review the payment terms prior to becoming a trustee.
Breach of Trust and Liability
When a trustee violates their responsibilities and duties as a fiduciary, the beneficiaries may sue. Failing to fulfill trustee duties can result in two scenarios: surcharge or removal.
Surcharge requires a trustee to repay any assets that were lost or mismanaged under their authority; removal will eliminate the trustee as the trust’s fiduciary and see another person appointed to manage the assets.
Branches of trust can include using assets for personal gain, favoring one beneficiary over another, failing to maintain accurate financial records, and withholding asset distributions as outlined in the trust.
If you are concerned about how a trust you own is being handled, you can speak with a lawyer for assistance. Beneficiaries can also seek legal counsel if they believe a loved one’s trust is being mismanaged. Alvine Law Firm is here to help every client resolve their matters promptly and protect people’s legal rights.
Contact us at 605-275-0808 to schedule a free consultation with a trust dispute lawyer in Sioux Falls, SD, today.