Clients and potential clients—whether a beneficiary of a trust or perhaps even the trustee of a trust—often ask about the duties of a trustee under Arkansas law. This is a very broad question and cannot be done justice in a single Blog post.
However, in general (unless the trust specifically overrides the general requirement) a trustee is charged with:
—A Duty To Obey The Grantor (while the trust is still revocable the duties of the trustee are owed to the grantor, and the trustee may generally follow a direction of the grantor even if it is still contrary to the trust’s terms)
—A Duty Of Administration (to administer the trust in good faith, according to the trust’s terms and purposes and the interests of the beneficiaries);
—A Duty Of Loyalty (perhaps the most important duty, which includes putting the interests of the beneficiaries above the interest of the trustee or any third party);
—A Duty Of Impartiality (whenever the trust has two or more beneficiaries, to act with impartiality with regard to the investment, management, and distribution of the trust property);
—A Duty Of Prudent Administration (regardless of whether the trustee receives compensation, to administer the trust as a prudent person would in light of the purposes, terms, requirements, and other circumstances of the trust);
—A Duty To Control And Care For Trust Property (to collect and insure trust property, pay debts and hire caretakers if necessary, keep adequate records, keep trust property separate from the trustee’s own property, enforce claims of the trust, defend claims against the trust, not allow beneficiaries to use trust property unless otherwise allowed, etc.);
—A Duty To Report (to provide information about the trust in general, the trustee, the trust’s existence, the trustee’s compensation, the assets and liabilities, etc.; keep in mind that this duty may only come into effect once the grantor of a revocable trust is deceased or deemed incompetent);
—A Duty Of Confidentiality (trustees have been charged with the responsibility to keep trust matters, including the terms of the trust, the nature of the trust’s assets, and the identity of beneficiaries, confidential unless waived by the terms of the trust or required by law);
—A Duty To Administer The Trust In An Appropriate Place (while the trustee can move a trust’s primary place of administration, the trustee is under a continuing duty to administer the trust in a location that is appropriate in light of the trust’s purposes, administration, and interests of the beneficiaries); and
—A Duty To Use Reasonable Care To Prevent Cotrustees From Breaching The Trust, And To Obtain Redress If A Breach Is Committed (this basically means just what it says—if the first trustee has a cotrustee [second trustee] and that second trustee is violating their fiduciary duties, the first trustee has an obligation to take reasonable action to prevent further harm).
A trustee’s duties have been stated in different ways, but the foregoing is a fair summary of the trustee’s primary obligations under Arkansas law. Again, the terms of the trust itself can override some of these duties, which is why it is extremely important to read and understand the actual language of the trust instrument. All of these issues will be examined in more depth in later Blog posts.
Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.
