Understanding a Trustee’s Duties of Competence: Part I
When managing a trust, a trustee in Texas has a number of duties. The largest category of these falls under the heading “duties of competence.”
These duties can all be classified as duties of “competence,” because they all relate to a trustee’s obligation to use the same skill and care that an “ordinary, capable and careful person” would use in conducting his or her own affairs. In other words, the duty of competence does not require the trustee to be a professional financier, accountant, or lawyer – but it does require the trustee to do things like research options, read the fine print, and consult professionals when necessary.
Duties that are included in the duty of competence include:
Duty to Review Assets and Make Decisions
When the trustee receives the trust’s assets, he or she must review them within a reasonable amount of time and make certain decisions as to how they will be handled. The trustee must also ensure that the trust portfolio complies with the trust’s rules and the Texas Trust Code.
Duty to Take and Keep Control of Trust Property
The trustee must take all reasonable steps to obtain and retain control of the property belonging to the trust, so that it cannot be lost, stolen, or compromised.
Duty to Keep and Render Accounts
The trustee has a duty to keep full, clear, and accurate accounts of the trust estate and to provide a written copy of these to the beneficiary upon request.
Duty to Comply With Texas’s “Prudent Investor” Rule
Sections 117.003 and 117.004 of the Texas Trust Code state that trustees must “invest and manage trust assets as a prudent investor would.” This includes considering the trust’s specific circumstances and using “reasonable care, skill, and caution” in making investment decisions.
Duty to Exercise Reasonable Care and Skill
When a trust involves something other than an investment, the trustee must use the same reasonable care and skill he or she would use in handling his or her own property.
Duty Not to Delegate
Trustees are required to administer the trust personally, rather than delegating this job to someone else. However, trustees may consult professionals like attorneys, lawyers, and brokers when necessary.