Are a Trustee and Personal Representative the Same Thing?
While a trustee is tasked with administering the assets of a trust for the benefit of third parties, a personal representative is tasked with administering assets owned by a person who has died. A trustee is nominated by the trust instrument, beneficiaries, other trustees, or a third party. A personal representative can be nominated in a will but is appointed by the Probate and Family Court.
I am often asked about the difference between a trustee and a personal representative. While both of these roles are considered fiduciaries that manage assets, the types of assets they manage and the way that they are appointed vary significantly.
What is a Trustee?
A trustee is a person or entity who holds and administers property for the benefit of a third party. The property that the trustee manages is limited to the property in trust. A trustee can accept or decline trusteeship by complying with the method of acceptance contained in the trust or if there is no such method, exercising control over property held in the trust. See. M.G.L. 203E § 701. More than one trustee may be named, known as a “co-trustee.” Co-trustees who are unable to reach a unanimous decision may act by a majority decision. See. M.G.L. 203E §701(a). Often, a person who settles a trust also executes a so-called “pour-over will.” A pour-over will “pours over” the probate estate into the trust. In this way, assets that originate in the probate estate may eventually be managed by the trustee.
A trustee has a legal duty to administer the trust in good faith in accordance with its terms and purposes and the interest of the beneficiaries. See. M.G.L. 203E § 801. All trustees owe their beneficiaries a duty of loyalty which requires that they administer the trust solely in the interests of the beneficiaries. See. M.G.L. 203E § 802(a). Trustees owe a duty of impartiality to the beneficiaries. “If a trust has [two] or more beneficiaries, the trustee shall act impartially in investing, managing and distributing the trust property, giving due regard to the beneficiaries respective interests.” M.G.L. 203E § 803
What is a Personal Representative?
A personal representative is a person, nominated in a will or with statutory priority, and appointed by the Probate and Family Court to administer a decedent’s estate. See. M.G.L. 190B § 1-201(37). Many of my clients are more familiar with the term “executor” which shares the same meaning. A personal representative is limited to administration of probate assets. Probate assets are the assets owned by the decedent at the time of their death.
Notably, assets held in trust or assets with transfer-on-death or pay-on-death beneficiary designations (e.g., life insurance, 401(k), IRA, certain bank accounts, certificate of deposit [CD], and taxable brokerage accounts) are not considered part of the probate estate. The personal representative’s primary functions are to safeguard the estate assets, pay lawful debts, and distribute the estate to the heirs or devisees of the estate.
Once appointed by the Probate Court, the Registry of Probate will issue letters of authority. Letters are evidence of the personal representative’s appointment and proof of authority to act on behalf of the estate and shall issue only if a personal representative is appointed and a bond is approved. The register for each division is responsible for the issuance of Letters. M.G.L. 217 § 22.
The person or persons who are entitled to serve as personal representative are those with “priority for appointment.” M.G.L. 190B § 3-203.
Their priority is determined by the following order:
- the person with priority as determined by a probated will including a person nominated by a power conferred in a will;
- the surviving spouse of the decedent who is a devisee of the decedent;
- other devisees of the decedent;
- the surviving spouse of the decedent;
- other heirs of the decedent;
- and if there is no known spouse or next of kin, a public administrator appointed pursuant to chapter 194.
Unless waived by the will, a personal representative must file a bond. See. M.G.L. 190B § 3-603. Trustees need not file a bond nor is there a statutory priority for appointment.
So What’s the Difference?
While often the same person or people are selected to serve as trustee and personal representative, their roles are quite different. In most cases, avoiding the process of appointment and administration by a personal representative can represent substantial savings with respect to time and money. If you are interested in learning more about trustees, personal representatives, and more, contact Cote Law Group, PLLC to schedule your free consultation by calling +1 (781) 882-8001.