Agreeing to serve as a trustee is agreeing to be held to one of the highest legal standards in private law. A trustee is a fiduciary, someone who manages assets for the benefit of others and is personally liable if they get it wrong. Most people who accept the role do not fully understand what it requires until they are already in it.
Being asked to serve is often an honor, it reflects the trust the grantor placed in you. But many people agree to serve without fully understanding what the role requires. This article describes the core legal duties of a trustee under Massachusetts law, governed by the Massachusetts Uniform Trust Code (Chapter 203E).
Core Fiduciary Duties
Duty of Loyalty
The trustee must administer the trust solely in the interest of the beneficiaries. Self-dealing, transactions that benefit the trustee personally at the expense of the trust, is prohibited. Even the appearance of a conflict of interest requires careful management.
Prudent Investor Rule
The trustee must invest and manage trust assets as a prudent investor would, considering the trust's purposes, distribution requirements, and risk tolerance. Massachusetts has adopted the Uniform Prudent Investor Act, which emphasizes diversification and portfolio-level risk management.
Duty to Account
The trustee must keep clear and accurate records of all trust transactions and provide regular accountings to beneficiaries. Sloppy recordkeeping is one of the most common sources of trustee liability, particularly in family-administered trusts.
Duty to Inform
The trustee must keep beneficiaries reasonably informed about the trust and its administration. This includes providing a copy of the trust upon request, notifying beneficiaries of their interest, and reporting on significant developments that affect the trust.
Duty of Impartiality
When a trust has both current beneficiaries (who receive income) and remainder beneficiaries (who receive the principal eventually), the trustee must balance their competing interests impartially. Favoring one class over the other can constitute a breach of fiduciary duty.
Duty to Keep Property Separate
Trust assets must be held separately from the trustee's personal assets and must be clearly identified as trust property. Commingling trust funds with personal accounts is a serious breach, even when done carelessly rather than dishonestly.
The Scope of the Role
Beyond the legal duties, the practical demands of trusteeship can be significant. A trustee may need to:
- Open and manage dedicated trust bank and investment accounts
- File annual trust tax returns (Form 1041) with the IRS and Massachusetts DOR
- Respond to beneficiary inquiries and provide accountings on request
- Make distribution decisions, often navigating competing interests or emotional family dynamics
- Oversee real estate, business interests, or other non-liquid assets held in the trust
- Work with attorneys, accountants, and financial advisors as needed
For a large or complex trust, administration can be a part-time job. For a simpler trust that holds liquid assets and makes straightforward distributions, the burden is much lighter. But in either case, the legal standard of care is the same.
Family Trustee vs. Professional Trustee
Most trusts name a family member as trustee, and this works well in many situations. Family trustees have intimate knowledge of the grantor's wishes and the beneficiaries' circumstances that no outside professional can replicate. They are often willing to serve without compensation, which preserves trust assets.
The challenges arise when the family trustee lacks financial sophistication, when family dynamics create conflict, or when the trustee is also a beneficiary, creating tension between personal interest and fiduciary obligation. A family trustee who consistently favors one beneficiary, or who makes imprudent investment decisions, or who fails to keep proper records, may face personal liability.
Professional trustees, attorneys, accountants, or corporate trust companies, bring expertise and institutional continuity but charge fees (typically a percentage of assets annually) and may lack the personal connection that makes trust administration feel like stewardship rather than management.
Trustee compensation in Massachusetts. Under the Massachusetts Uniform Trust Code, a trustee is entitled to reasonable compensation for their services, even if the trust document doesn't specifically address it. Family trustees often waive compensation, but professional trustees do not. When selecting a trustee, consider the long-term cost of professional administration as part of the overall estate plan.
Liability and Removal
A trustee who breaches a fiduciary duty can be held personally liable for any resulting loss to the trust. Courts can also order the trustee to disgorge profits from improper self-dealing. In serious cases, a court may remove the trustee and appoint a successor.
Beneficiaries who believe a trustee has acted improperly can petition the Probate and Family Court for an accounting, for removal, or for damages. This is not a theoretical risk, trustee disputes are among the more common trust litigation matters in Massachusetts courts.
If You've Been Asked to Serve
Before accepting a trustee appointment, it is worth consulting with an estate planning attorney who can explain the specific trust's terms, the scope of what you'll be required to do, and the potential risks. Serving as a trustee is a serious commitment, and being informed from the start makes administration smoother and reduces the risk of liability.
Contact Brigantine Law whether you are creating a trust and selecting a trustee, currently serving as a trustee and have questions about your obligations, or dealing with a trust dispute as a trustee or beneficiary.
Most trustee liability arises not from dishonesty but from misunderstanding the role. Understanding the duties before you begin is the most important thing a new trustee can do.