Creating a comprehensive estate plan typically involves choosing a variety of different, yet inter-related, estate planning tools that help achieve the various estate planning goals. One of the most common of those tools is a trust. Though once used almost exclusively by wealthy families to pass down the family fortune without incurring a transfer tax, trusts are now found in the average person’s estate plan, due in large part to the fact that trusts have evolved to the point where there is now a specialized trust to help achieve almost any estate planning goal. No matter what type of trust you create, you will need to appoint a Trustee to administer the trust. One of the most common, and costly, mistakes people make when creating a trust is to appoint the wrong person as Trustee. Knowing this, you may be wondering if trust lawyers can act as the Trustee of your trust.
Understanding Trusts – The Basics
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also called a Maker or a Grantor, who transfers property to a Trustee. The Trustee holds that property for the trust beneficiaries. The beneficiary of a trust can be an individual, an entity (such as a charity or political organization), or even the family pet. A trust must have at least one beneficiary but may have an unlimited number of beneficiaries. A trust may have both current and future beneficiaries.
All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts. If the trust is a revocable living trust, as the name implies, the Settlor may modify or terminate the trust at any time. An irrevocable living trust, however, cannot be modified or revoked by the Settlor at any time nor for any reason once active.
Trustee Duties and Responsibilities – Why a Professional Trustee Is Often Best
In general, the Trustee’s job is to oversee the administration of the trust and manage the trust assets. That explanation, however, is an over-simplification of the duties and responsibilities of a Trustee. In practice, a Trustee plays a number of diverse roles during the administration of a trust, including:
- Managing and protecting trust assets
- Abiding by the trust terms unless they are impossible, illegal, or unconscionable
- Investing trust funds using the “Prudent Investor Standard”
- Monitoring trust investments
- Communicating with trust beneficiaries
- Resolving conflicts among beneficiaries
- Making discretionary decisions
- Distributing trust funds to beneficiaries
- Approving or denying distributions if given discretionary authority
- Keeping detailed trust records
- Preparing and paying trust taxes
As you can see, the job of Trustee typically requires more than a passing knowledge of the applicable laws as well as a degree of financial acumen. This is why trusts often fail – because the Settlor appoints a close friend, spouse, or family member to the position of Trustee without stopping to consider if that person actually has the necessary experience and skill set for successfully fulfill the role.
As the Settlor of a trust, you have the option to appoint a professional Trustee, such as a trust attorney. Given the importance of the Trustee’s role in the success of the trust, it is an option you should seriously consider. Not only does a professional Trustee have the experience and skills necessary to successfully administer the trust, but appointing a professional Trustee eliminates even the hint of favoritism when it comes to discretionary trust decisions. It also greatly reduces the possibility of a conflict of interest because the Trustee should not have any pre-existing relationships with the trust beneficiaries.
Contact Trust Lawyers
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding your choice for Trustee of your trust, contact the experienced Florida trust lawyers at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.