Ideally, when a trust is created, the trust creator discusses the position with the person they intend to appoint as the Trustee before making that appointment. Sometimes, however, that does not happen. If you recently learned that you were appointed to be the Trustee of a trust, you may have questions. The Bellevue trust attorneys at Legacy Estate Planning, LLC explain some basic duties and responsibilities involved in administering a trust.
Trust Fundamentals
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 may include 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. Living trusts are further sub-divided into revocable and irrevocable living trusts.
Trust Administration Duties and Responsibilities
A trust is created using a document known as a trust agreement. Every trust agreement is unique; however, all include the appointment of a Trustee. The overall job of a Trustee is to manage the trust assets and to administer the trust using the terms created by the Settler. Common duties and responsibilities of a Trustee during the administration of a trust include:
- Understanding 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. A Trustee must adhere to the the “Prudent Investor Standard.” A Trustee is in a fiduciary role. Therefore, guarding the principal should always be the primary focus with a return on investments secondary.
- Protecting the trust assets. A Trustee is responsible for managing and protecting all assets held by the trust. This could include anything from reconciling bank statements to maintaining real property.
- Mediating 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 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 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.
Do I Need an Attorney to Administer a Trust?
Although you are not legally required to work with an attorney if you are responsible for administering a trust, you should consider doing so for several reasons. To successfully administer a trust, you will need to understand the state and federal laws used to govern the trust. Mistakes are easy to make if you are unfamiliar with trust administration and those mistakes can be costly – both for the trust itself and potentially for you personally. Consulting with an experienced trust administration attorney is the best way to protect the trust assets and yourself while acting as the Trustee.
Contact Bellevue Trust Attorneys
If you have additional questions or concerns regarding the administration of a trust, contact the experienced Bellevue trust attorneys at Legacy Estate Planning, LLC by calling (425) 455-6788 to schedule an appointment.
- What Everyone Should Know about Financial Exploitation of the Elderly - November 27, 2023
- The Lessons from Lisa Marie - July 27, 2023
- Best in the PNW: Vote for Legacy Estate Planning! - June 27, 2023
