July 09, 2019

Helping Trustees Avoid Liability – The Duty of Record Keeping and Identification of Trust Property

The duty of record keeping and identification of trust property requires that a trustee maintain the material information necessary to protect the beneficiaries’ interests. Not only is maintaining the records its own duty, but it is the prerequisite for the duty to inform and report. A trustee should:

  • Keep accurate and organized records.
  • Record any transfers of property into or out of the trust.
  • Document the decision-making process for trust investments.
  • Account for:
    • The nature and value of the trust assets when received.
    • How much principal and income the trust has received and from where.
    • How much principal and income has been disbursed and to whom.
    • Any commissions paid.
    • The amount and location of any balance on hand.
    • Expenditures, gains or losses of the trust.
  • Clearly identify the trust property as separate from the trustee’s own property.
  • Retain trust records for as long as the trustee may be liable to the beneficiaries.
  • Seek court approval of administrative actions to limit liability.

Failure to keep accurate and thorough records can result in a court resolving any disputed fact against the trustee.

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