Were you recently informed that you are the Trustee of a trust? If so, and this is the first time you have served as a Trustee, the prospect of administering a trust may sound daunting. That may cause you to wonder if you need an attorney to help you. A trust administration attorney at Nash Bean Ford & Brown, LLP explains why retaining the services of an attorney would likely be a wise choice on your part.
Trust Basics – Elements of a Trust
If you have been named as the Trustee of a trust, you need to make sure you understand some trust basics, starting with the elements required to create any trust:
- Settlor – This is the person who creates the trusts and may also be referred to as the “Maker” or “Grantor” of the trust.
- Trustee – The Trustee is appointed by the Settlor and is in charge of managing and investing trust assets as well as administering the trust using the trust terms.
- Beneficiary – Every trust must have at least one beneficiary to receive the benefits of the trust; although, a trust may have numerous beneficiaries.
- Terms — The Settlor creates the terms that govern the administration of the trust. Terms may be almost anything as long as they are not illegal or unconscionable.
- Assets – A trust requires funding. Funding may include any type of assets, including cash, securities, real or personal property, or life insurance proceeds.
How Does a Trustee Administer a Trust?
Just as no two trusts are exactly the same, no two trust administrations are exactly the same. The overall job of a Trustee, however, is to manage the trust assets and to administer the trust using the terms created by the Settler. Among the most common specific duties and responsibilities of a Trustee are the following:
- 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.
- 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 “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.
- 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 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 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 Really Need an Attorney to Help Me?
To successfully administer a trust, a Trustee must understand the financial concepts used to protect and grow the trust assets as well as the applicable laws used to govern the trust. If you are like most first time Trustee’s, both will likely be new to you. Mistakes made during the administration of a trust are frequently 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. Moreover, you could be held personally liable for mistakes made during the administration of the trust. The best way to prevent that from happening, and to ensure a successful administration of the trust, is to have an experienced trust administration attorney on your side through the administration of the trust.
Contact a Geneseo Trust Administration Attorney
For additional information, please join us for an upcoming FREE webinar. If you have additional questions or you need assistance administering a trust, contact an experienced trust administration attorney at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.