Although a trustee is entitled to exercise certain powers over the assets of the trust he administers, he is also subject to responsibilities towards trust beneficiaries. While state law establishes some of these duties, the terms of the document that create the trust establish others. A trustee who fails to meet these responsibilities can be subjected to civil and even criminal liability.
General Fiduciary Duties
Maryland imposes two major fiduciary duties on trustees, both adapted from English common law: the duty of loyalty and the duty of care. Except for a reasonable stipend, the trustee may not profit from administering the trust, even if his profit does not come at the expense of beneficiaries. A trustee must also administer trust assets with as much care as a reasonably prudent person would use in administering another person's assets. If he possesses professional skills, such as financial management skills, he is held to the standard of care of a professional.
Trust Administration
A trustee must undertake a variety of specific administrative duties on behalf of trust beneficiaries. If trust assets earn income, he must file both federal and Maryland trust income tax returns and pay any taxes due from trust assets. If the trust owns property, he must pay property taxes from trust assets. He must distribute assets to beneficiaries as specified in the trust document; an aggrieved beneficiary may seek a court order compelling the trustee to make any required distributions. The trustee may delegate some of his administrative duties, but he bears ultimate responsibility for the fulfillment of all delegated duties.
Accounting Reports
A trustee must keep detailed and accurate records of his disposition of trust assets. At least once a year, he must issue beneficiaries a written report detailing the trust's income, expenditures and distributions. He must also issue such a report upon the reasonable request of any beneficiary, upon the reasonable request of a beneficiary's legal guardian or legal representative, or in response to an order issued by a Maryland state court.
Effect of the Trust Document
The terms of the trust document that created the trust -- a declaration of trust or, in the case of a testamentary trust, the grantor's last will and testament -- may add additional duties to those created by Maryland law. For example, it may require the trustee to distribute accounting reports more frequently than once a year. Although the trust document may allow the trustee broad discretion to manage or invest trust assets, it may not relieve the trustee of his fiduciary duties of loyalty and care towards trust beneficiaries.
Read More: Documents Needed to Create a Trust