4 Trust Administration Mistakes You Can Avoid Making

One of the most common additions to a comprehensive estate plan is a trust agreement. When a trust is created, the Settlor (creator) of the trust must appoint a Trustee to administer the trust. If you find yourself acting as a Trustee, it is crucial that you avoid common pitfalls. Toward that end, the Port St. Lucie attorneys at Kulas & Crawford discuss four common trust administration mistakes you can avoid making.

Trust Administration Basics

The Settlor of a trust creates the terms that are used to administer the trust and appoints the Trustee who is charged with overseeing the administration of the trust. As the Trustee of a trust, you hold a fiduciary position, meaning you must treat the trust assets with the utmost care and always make decisions with the best interest of the trust beneficiaries in mind. Not only could a mistake made during trust administration cause the trust to fail, but a Trustee can be held personally liable for mistakes under certain conditions.

Common Trust Administration Mistakes

Given the important, and often complex, nature of the job of a Trustee, it is always wise to consult with an experienced trust administration attorney before and during the administration of a trust. There are, however, some common mistakes you can try to avoid making, including:

1. Failing to understand. As the Trustee of the trust, you are required to understand the terms of the trust and abide by them at all times. You also need to keep the trust purpose in mind. Furthermore, administering a trust requires you to have at least a rudimentary understanding of finance and law. If you do not have the knowledge that you need to understand and administer the trust, it is incumbent on you to consult with the appropriate professionals.
2. Failing to fulfill your fiduciary duty. Not only must you understand the trust terms and follow them, but you have a fiduciary duty to the trust and the trust beneficiaries. This means you must be very cautious when investing trust assets and avoid common ways in which a fiduciary can breach that duty, such as mismanaging trust assets, allow a conflict of interest, or self-dealing. A fiduciary duty is the highest duty one person can owe to another in the eyes of the law. Make sure you understand your duty and do not breach it or you could be held personally liable.
3. Failing to keep detailed records. You must keep detailed records that reflect all trust business. You must also inform the trust beneficiaries about important trust business. Detailed records may be necessary for you to justify your fee for serving as Trustee and/or if the trust becomes involved in litigation. In addition, you are responsible for completing tax returns and paying any taxes owed by the trust. Failing to keep detailed business and accounting records could result in a loss of trust assets if you fail to calculate and/or pay taxes due.
4. Failing to seek professional assistance when needed. While the Settlor of the trust clearly trusted you to administer the trust, you are not required to do so without help. In fact, failing to seek assistance from a professional, such as an attorney or a financial advisor, when needed could be considered a breach of your duty to the trust and the trust beneficiaries.

Do You Need Help Administering a Trust?

To learn more, please join us for an upcoming FREE seminar. If you would like additional help serving as Trustee during the administration of a trust to avoid making mistakes, please contact an experienced Port St. Lucie trust administration attorney at Kulas Law Group by calling (772) 398-0720 to schedule a consultation.