Ideally, when a trust is created, the Settlor (the creator) gives considerable thought to the appointment of the Trustee and discusses that appointment with the prospective Trustee before making it final. In reality, however, that doesn’t always happen. In fact, Settlors often appoint a spouse, family member, or close friend to be the Trustee of their trust without really contemplating the individual’s suitability for the position much less discussing with them. If you find yourself appointed as the Trustee of a trust and you have never before acted as a Trustee, should you hire an attorney to help you? While it is your decision to make, the Port St. Lucie trust administration attorneys at Kulas & Crawford explain why you should consider retaining an attorney to help you administer the trust.
Trust Basics for the Trustee
If you have been appointed as the Trustee of a trust it is wise to learn some trust 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. If the trust is a testamentary trust, it means the trust will not activate until the Settlor’s death. If the trust is a living trust, the trust becomes active as soon as all formalities of creation are in place.
Trust Administration Basics
In broad terms, the job of a Trustee is to manage the trust assets and to administer the trust using the terms created by the Settlor. Understanding the duties and responsibilities of a Trustee in a little more detail may help you understand why having an experienced trust attorney by your side is a wise choice. Common examples of Trustee duties and responsibilities include:
- Managing the trust assets. As the Trustee, you are responsible for managing and protecting all assets held by the trust. This could include anything from reconciling bank statements to maintaining real property.
- Following the trust terms. Unless the terms of a trust are impossible, illegal, or unconscionable, the Trustee is required by law to use the terms, exactly as written by the Settlor, to administer the trust. To properly administer the trust, you must be able to understand, and follow, all the terms of the trust.
- Investing trust funds using the “Prudent Investor Standard.” You are responsible for managing someone else’s assets, putting you in a fiduciary role. Guarding the principal should always be the primary focus with a return on investments secondary.
- Resolving conflicts among beneficiaries. Conflicts and disputes among beneficiaries can occur during the administration of a trust. As the Trustee you must remain neutral and try to resolve conflicts before they escalate which could result in litigation.
- Distributing trust funds to beneficiaries. The trust terms dictate how and when to distribute the trust assets; however, you may also have the discretion to make additional distributions which gives you a considerable amount of power.
- Keeping detailed trust records. Ultimately, the Trustee is accountable for the success, or failure, of the trust. Keeping detailed records of everything involved in administering the trust is crucial in case the decisions you made are ever questioned.
- Preparing and paying trust taxes. A trust is a separate legal entity which means the Trustee must see that the trust files a tax return every year and pays any taxes due.
Why Should I Retain an Attorney to Help Me?
Trust administration requires the Trustee to understand the laws that govern the trust as well as the financial concepts used to successfully protect and grow the trust assets. Unless you have a background in law and/or finance, both of these will likely be new to you. The vast majority of mistakes made during the administration of a trust are the result of a Trustee’s failure to understand what is expected of him/her and/or failing to have a clear understanding of the trust terms. You may have the best of intentions; however, if you lack the experience necessary to successfully administer the trust, mistakes may occur. In a worst case scenario, you could even be held personally liable for those mistakes. The best way to prevent that from happening, and to ensure that the trust will thrive, is to have an experienced trust administration attorney on your side to offer you the advice and guidance you need as a first-time Trustee.
Contact Port St. Lucie Trust Administration Attorneys
To learn more, please download our FREE solid estate plan checklist. If you have additional questions or concerns about trust administration, please contact the experienced Port St. Lucie trust administration attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.
