For many people new to estate planning or estate administration, the differences between the various types of fiduciaries involved may seem confusing. People who have both a will and a trust will also have personal representatives and trustees. In Massachusetts, a personal representative is the technical name for the more commonly known term “executor.” It is important to understand the differences in the roles of trustees and personal representatives.
6 Areas Where Trustees and Personal Representatives Differ
How does the role of a trustee differ from that of a personal representative? The following are six examples:
The relationship between the fiduciary and the beneficiaries.
Both a personal representative and a trustee have a fiduciary relationship with the beneficiaries of the estate or the trust. However, the relationship between a trustee and the beneficiaries of a trust is very much like that of the parties to a contract. Instead of having a contract, however, the terms of the relationship are defined in the trust instrument. The relationship between the personal representative and the beneficiaries of the estate is governed by Massachusetts’ law and the terms of the will. The personal representative is there to liquidate the estate, pay certain debts, and distribute the assets.
Duties relating to the investing of assets.
Typically during the course of an estate administration, the personal representative must worry about gathering, protecting, and distributing assets, but rarely must focus on investing those assets for growth. During a trust administration, however, some assets may be directed to be held in trust for an extended period of time and therefore must be invested wisely and in a prudent manner. If the trustee does not do so, he or she could face potential liability.
Duties relating to the payment of debts.
The duties of a personal representative differ from that of a trustee in that the personal representative must pay the legitimate debts of the decedent in accordance with the law. Rules relating to debt repayment differ somewhat for trustees, and often depend largely on the terms of the trust and the will.
Authority to take actions.
A trustee has authority to take action during a trust administration upon acceptance of his or her appointment. This could occur during the lifetime of the person who created the trust. A personal representative, however, has no authority until the probate court allows the will and issues the appointment of the individual as personal representative. This means that the individual will have no authority to act until after the decedent has passed away.
In most cases, a trustee will have little to no court oversight involved in the administration of a trust. The trust administration is governed by the terms of the trust, and unless the trust instrument reads otherwise or there is a dispute between some of the parties involved, the court generally stays out of it. A probate administration, however, will involve a greater amount of court supervision. Massachusetts does allow for certain types of probate proceedings that have less court involvement than others, but there will still be more involvement than the average trust administration.
Where a person chooses their trustee or personal representative.
A personal representative is named under the terms of a will. A trustee, however, is named under the terms of a declaration of trust.
When it comes time to administer the trust or estate of a loved one, we are here to guide you through the process. For more information, we encourage you to contact us today at (978) 465-5407.