Have you recently been appointed to be the Successor-Trustee of a trust? It is easy to be overwhelmed if this is the first time you have served as a Trustee. To help get start off on the right foot, the trust administration attorneys at Wilcox Attorneys, PA offer some trust administration tips for the beginner Trustees.
The Big Picture: Understand the Trustee’s Role
Before focusing on the details of a Trustee’s job, you need to understand the big picture. A trust is created by a Settlor (also referred to as a Grantor or Trustor) using a legal document called a trust agreement. In the trust agreement, the Settlor appoints a Trustee. The Trustee is responsible for administering the trust using the terms included in the trust agreement. A Trustee is in a fiduciary position. Fiduciary’s must make all decisions that are fair and reasonable for all beneficiaries and keep with the terms of the trust.
Trust Administration Tips
Every trust agreement is unique. No two Trustee’s will encounter the same duties, responsibilities, and challenges when administering a trust. Nevertheless, the following general trust administration tips should help you as you embark on your role as Trustee:
- Understand the trust agreement. Read the trust agreement several times. Pay particular attention to the type of trust created (living or testamentary, revocable or irrevocable). Discover all of the assets owned by or earmarked to be transferred into the trust. Look for the trust purpose and the provisions relating to distribution of the trust assets.
- Consult with an experienced trust administration attorney. There are complicated laws and procedures applicable to the administration of a trust. Avoid personal liability for mistakes you make while administering the trust, consult with an experienced attorney before and during your role as Trustee.
- Consult with a financial advisor. Unless you have a background in finance, consult with a financial advisor throughout your term as Trustee. You must make wise investments.
- Communicate with trust beneficiaries. The beneficiaries of a trust have a right to be kept informed about trust business. They may also have the right to request discretionary distributions. Keeping an open line of communication will ultimately make your job easier.
- Document, document, document. Keep detailed records of everything you do as Trustee. Those records may be needed to justify your fee, to defend the trust during litigation, or to defend yourself if a beneficiary claims you mishandled the trust assets.
- Consult a CPA. The Trust may be required to pay a variety of different taxes, including but not limited to personal property, real estate, and income taxes.
- Invest prudently. When it comes to investing the trust assets, remember that protecting the trust principal always takes precedence over profits. Also, remember your fiduciary duty to the trust beneficiaries. Beyond those important reminders, look to the trust terms for additional guidance about investing.
- Avoid conflicts. A conflict can arise between you and a beneficiary, between you and the trust, or within your role as Trustee itself. To avoid conflicts avoid self-dealing and keep personal relationships out of trust decisions.
- Always defend the trust. Finally, remember that you are responsible for defending the trust if a conflict arises. That includes defending the trust throughout litigation if a conflict results in legal action.
Do You Need Help Administering a Trust?
For additional information, please sign up for one of our FREE estate planning webinars. If you have been appointed as a Trustee and would like assistance administering the trust, contact the experienced, Fayetteville, Springdale, Rogers, Bentonville, and Northwest Arkansas estate planning attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.
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