This is an article from the Law Offices of Kobrick & Moccia (https://www.kobricklaw.com/) in Garden City, New York, that we thought others might find helpful.
Like many people, you may have decided to include a trust in your comprehensive estate plan. Though every trust agreement is as unique as the “Trustor,” (person who created the trust) all trusts do have several components in common. One of those is the need to appoint a Trustee. Unfortunately, we frequently spend very little time, if any, contemplating the best person for the job of Trustee. To ensure that you are not one of those people, it helps to understand why the Trustee you appoint could make or break your trust.
All trust agreements require the same basic elements for creation:
- Trustor — the person who creates the trust agreement
- Beneficiary – the person, or entity, who will benefit from the trust
- Terms – create guidelines for how the trust will be administered and the assets disbursed to the beneficiaries of the trust.
- Funding — assets sufficient to fund the trust
- Trustee – to administer the trust terms and manage trust property
People often make the mistake of appointing a spouse, sibling, or friend to the position of Trustee without giving the subject much thought. It is only later that the error in appointing the wrong person for the job becomes apparent.
A Trustee is charged with managing trust assets until they are distributed to the beneficiaries of the trust. Often, this includes investing trust assets. The law says that a Trustee is in a fiduciary role, meaning that the Trustee must use the utmost caution and care with trust assets and must not take risks when investing those assets. Though the law tries to prevent a Trustee from making risky or unwise investment choices, the law cannot ensure that a Trustee invests trust assets in a manner consistent with the wishes of the Maker. For that, you must depend on your choice of Trustee.
Along with investing and protecting trust assets, a Trustee must also be able to follow the trust terms with regard to distribution of trust assets. Sometimes those terms include a significant amount of discretion on the part of the Trustee.
Finally, a Trustee must have at least a basic understanding of the state and federal laws that apply to trusts and to trust administration, including the tax preparation requirements for a trust. Your spouse/sibling/friend may have the best of intentions; however, that does not make him/her the best person for the job.
If you have additional questions or concerns about who to appoint at the Trustee of your trust, contact the experienced New York estate planning attorneys at The Law Offices of Kobrick & Moccia. by calling 800-295-1917 to schedule your appointment.
- Estate Planning is Essential Whether You Are Married or Not - April 25, 2018
- Income Tax Basis in Estate Planning – Part 2 - April 23, 2018
- The Downsizing Generation: How to Handle a Surplus of Stuff When a Loved One Ages - April 18, 2018