One of the most common additions to a comprehensive estate plan is a trust agreement. Although every trust agreement is unique, one thing all trusts have in common is a Trustee who is charged with administering the trust agreement. Appointed by the Settlor (creator of the trust), a Trustee has a wide range of duties and responsibilities during the administration of a trust. For a first-time Trustee, just the thought of successfully administering the trust agreement can be intimidating. The Vero Beach trust administration attorneys at Kulas Law Group explain some common trust administration mistakes and how you might avoid them.
- Misconstruing or misunderstanding a trust term. A well drafted trust agreement may have a number of complex legal and financial terminology in it that can confuse or mislead a Trustee who has neither a legal nor financial background. To avoid making this mistake, read through the entire trust agreement several times until you are sure you understand every provision. If anything is vague or confusing, make a note to ask the trust attorney immediately. Ignorance is not an acceptable excuse if you make a mistake as Trustee and in some cases, you could be held personally responsible for an error.
- Trying to administer the trust without the assistance of an experienced attorney. As Trustee, you will likely have numerous legal questions and concerns. It is not a role you should take on without a legal professional to provide you with advice and guidance. This mistake can easily be avoided or corrected by retaining the services of a trust administration attorney.
- Failing to follow the “prudent investor standard.” When you invest assets owned by a trust, you must do so using the “prudent investor standard” which essentially means you must avoid risk, guard the trust principal, and be more careful with the assets and income than you would be with your own assets and income. A trust administration attorney can help you understand what is required of you and a financial advisor can help you avoid violating the standard.
- Forgetting about future beneficiaries. As the Trustee, everything you do must be for the best interest of the trust beneficiaries…all the trust beneficiaries. If the trust has both current and future beneficiaries, all decisions you make must consider the best interest of both classes of beneficiaries. This mistake is easy enough to avoid making by
- Failing to honor the trust purpose. It is difficult to set aside your own opinions; however, as the Trustee, everything you do must further the Settlor’s intended purpose and must abide by the trust terms created by the Settlor to further that purpose (unless a term is illegal or unconscionable).
- Creating a conflict of interest. If the Settlor was a family member or friend, there is a good chance you know at least one beneficiary. This can create a conflict of interest if you allow it. Make sure that any personal relationship you have with, or knowledge of, a beneficiary does not in any way interfere with your duties as Trustee.
- Making an error on the trust tax return or other tax-related errors. A trust is a separate legal entity. Therefore, a trust must file a trust tax return each year. If any taxes are due, they must also be paid in a timely manner. To ensure the tax returns are prepared correctly and any tax due has been calculated accurately it is best to hire a certified public accountant (C.P.A.) to help you.
Contact Vero Beach Trust Administration Attorneys
To learn more, please join us for an upcoming FREE seminar. If you have additional questions or concerns about trust administration, please contact the experienced Vero Beach trust administration attorneys at Kulas Law Group by calling (772) 398-0720 to schedule a consultation.