Disclaimer: This guide is general information, not legal or tax advice. Trust and fiduciary law varies by state. Consult an estate attorney and a CPA.
TL;DR
- A trustee manages trust property for beneficiaries under the trust document and state law; a fiduciary is anyone legally obligated to act in someone else’s interest (trustees, executors, conservators, agents under a power of attorney).
- Options: a family member or friend, a licensed professional fiduciary, or a corporate trustee (bank or trust company).
- California licenses professional fiduciaries through the Professional Fiduciaries Bureau: an exam plus 30 hours of approved education, and 15 hours of continuing education yearly.
- Tax duties: a trust or estate generally files Form 1041 if gross income exceeds $600 a year; fiduciaries can notify the IRS of their role with Form 56.
- Browse our trustees directory.
What does a trustee or fiduciary do?
Short answer: Manages money and property for someone else, following the governing document and the law, and accounts for it.
Typical trustee duties after a death:
– Gathering and securing trust assets
– Valuing assets — see How to Choose an Estate Appraiser
– Paying bills, expenses, and taxes
– Keeping records and informing beneficiaries
– Selling property if needed — see How to Choose a Probate Realtor
– Distributing assets according to the trust
The CFPB’s free Managing Someone Else’s Money guides explain fiduciary duties for trustees of revocable living trusts, agents under a power of attorney, court-appointed guardians, and government fiduciaries.
Family trustee, professional fiduciary, or corporate trustee?
Short answer: Family is often cheapest and most personal; professionals bring neutrality and experience; corporate trustees bring institutional continuity.
| Option | Strengths | Watch-outs |
|---|---|---|
| Family member or friend | Knows the family; may serve for little or no fee | Time, conflict, inexperience |
| Professional fiduciary | Neutral, experienced; licensed in some states (e.g., California) | Fees; check license and fit |
| Corporate trustee (bank/trust company) | Continuity, investment management | Fees; may require minimum asset levels; less personal |
A neutral professional can help when siblings disagree, the trust is complex, or no family member can serve.
How are professional fiduciaries licensed?
Short answer: It depends on the state. California is one state with a licensing bureau.
California example: The Professional Fiduciaries Bureau was created by 2006 legislation and began operating January 1, 2007. It regulates non-family professional fiduciaries serving as conservators, guardians, trustees, personal representatives, and agents under powers of attorney. Licensees must:
– Pass a licensing exam
– Complete 30 hours of approved education (including 1 hour of cultural competency)
– Complete 15 hours of continuing education each year (including 2 hours of ethics or cultural competency)
You can check a California license on the Bureau’s website. Other states may have no license, a certification, or court registration requirements.
Rules vary by state. California is used as an example where state law matters. Check your state court’s official pages, e.g., California, Florida, Texas, Illinois, or the DOJ’s court resources by state.
What are a trustee’s tax responsibilities?
Short answer: Notify the IRS of the fiduciary relationship, get an EIN when needed, and file the trust’s or estate’s income tax returns.
Per the IRS:
– Form 56 notifies the IRS of the creation or termination of a fiduciary relationship.
– Form 1041 is filed by the fiduciary of an estate or trust; an estate must file if gross income is more than $600 for the year. An EIN is needed, and beneficiaries receive Schedule K-1s.
– Calendar-year returns are due April 15; Form 7004 gives an automatic 5-month extension.
– For large estates, the executor files Form 706 within 9 months of death (Form 4768 provides an automatic 6-month extension to file).
See How to Choose a CPA for Estate and Trust Taxes.
What questions should you ask a professional or corporate trustee?
Short answer: Licensing, experience, fees, communication, investment approach, and conflicts.
- Are you licensed (where required)? Can I verify it?
- How many trusts like this do you administer?
- How do you charge — hourly, percentage of assets, flat fee? (We didn’t verify typical rates; get a written fee schedule.)
- Who will be my day-to-day contact?
- How often will beneficiaries receive accountings?
- Who manages investments, and do you use affiliated products?
- Do you use affiliated vendors (realtors, appraisers, cleanout companies)? Are referrals disclosed?
- Are you bonded or insured?
What are red flags?
Short answer: No license where required, unclear fees, poor accounting, or undisclosed conflicts.
- Can’t or won’t show license, bonding, or insurance
- No written fee agreement
- Delays or refusals in giving beneficiaries information
- Mixing trust money with personal funds
- Steering business to affiliated companies without disclosure
Frequently asked questions
What’s the difference between a trustee and an executor?
A trustee manages trust property; an executor (personal representative) manages the probate estate under court supervision.
Can a family member be trustee?
Yes, if named in the trust and willing. Many families choose a relative.
What is a professional fiduciary?
Someone paid to serve as trustee, conservator, guardian, executor, or agent for people who aren’t family. California licenses them.
How much does a professional trustee cost?
We couldn’t verify typical rates. Get a written fee schedule and compare.
Does a trust need its own tax return?
Often. A Form 1041 may be required; see IRS rules and talk to a CPA.
What is IRS Form 56?
A notice to the IRS that a fiduciary relationship has begun or ended.
Can a trustee be removed?
Usually by court order or as the trust allows. Talk to an estate attorney.
Where can I learn trustee duties?
The CFPB’s free guide for trustees is a good start.
Sources
- California Professional Fiduciaries Bureau: https://www.fiduciary.ca.gov/
- CFPB — Managing someone else’s money: https://www.consumerfinance.gov/consumer-tools/managing-someone-elses-money/
- IRS — About Form 56: https://www.irs.gov/forms-pubs/about-form-56
- IRS — About Form 1041: https://www.irs.gov/forms-pubs/about-form-1041
- IRS — Filing the estate income tax return (Form 1041): https://www.irs.gov/businesses/small-businesses-self-employed/deceased-taxpayers-filing-the-estate-income-tax-return-form-1041
- IRS — Instructions for Form 706: https://www.irs.gov/instructions/i706
- California Courts Self-Help — Guide to property after someone dies: https://selfhelp.courts.ca.gov/probate
- Florida Courts — Probate: https://www.flcourts.gov/Courts-System/florida-courts-help/other-resources/probate
- Texas Judicial Branch — Rules & Forms: https://www.txcourts.gov/forms.aspx
- Office of the Illinois Courts — Self Help: https://www.illinoiscourts.gov/self-help/
- U.S. Department of Justice — Court Resources by State: https://www.justice.gov/jmd/ls/state