When you become a trustee of a trust in Texas, your job is to administer the trust, following the rules laid out in the trust and in the Texas Trust Code – and, if there are no rules in the trust or the Trust Code that apply, the rules created by Texas common law.
In addition to keeping the trust’s specific instructions in mind, a trustee must also fulfill a number of duties. Generally speaking, these duties fall into one of four categories:
- Duty of loyalty,
- Duty of competence,
- Duty to reasonably exercise discretion, and
- Duty of full disclosure.
These duties, collectively, are sometimes known as “fiduciary duties.” A “fiduciary” is a person who has a special responsibility to another – one that goes “above and beyond” the ordinary duty of care that every person is expected to follow when they interact with others. As U.S. Supreme Court Justice Benjamin Cardozo wrote in 1928, “Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior” when one acts as a fiduciary.
A trustee has a fiduciary relationship with the beneficiaries of the trust, but these duties play out differently in different contexts, depending on the demands of the trust and the specific circumstances involved. To that end, strongly consider consulting with a qualified lawyer if you are confused about a particular step to take while administering a trust.
Many trustees find the list of duties to be a helpful guide when they encounter challenging and unexpected obstacles. For example, the duty of loyalty demands, among other things, that the trustee put the beneficiary’s interests first. If the trustee is “stuck” trying to decide between Plan A, which benefits the trustee, Plan B, which has neutral effects on everyone, or Plan C, which is the best plan for the beneficiary, the duty of loyalty makes the choice clear: the trustee should go with Plan C. The other duties also help guide the trustee’s decision making and planning in similar ways.