As trusts have become more popular in recent years, there’s been a growing interest in trust administration too. As valuable as a trust can be for any grantor’s estate planning efforts, this legal entity can be a source of confusion and disruption if it’s not properly managed. To complicate matters even more, trustees are often ill-equipped to administer their responsibilities on their own, since many people choose to appoint untrained laypersons to act as their trust administrators. If you’re a trustee charged with the administration of a grantor’s trust, here is what our trust administration lawyer thinks you need to know to properly fulfill your role.
Remember your duty as trustee
As a trustee, you have a duty to ensure that your decisions are made with the best interests of the trust and its beneficiaries in mind. That means that you need to avoid even the appearance of impropriety, and should be diligent about caring for the assets in your charge. The trustee role is an awesome responsibility that requires a serious commitment to protecting the value of trust assets so that they can be used for the benefit of the trust beneficiaries. A trust administration lawyer can help to ensure that you meet these expectations.
One of the first things that you will need to take care of is the notification that must be provided to all the trust’s beneficiaries. Each of those heirs is entitled to receive a formal notice, and the delivery of that notice provides the heir with an opportunity to contest the trust. Most trusts are contested based on claims that the grantor lacked the mental capacity to make the trust or that there was undue influence. As you might expect, these claims are not easy to prove. It’s always advisable to hire a trust administration lawyer whenever you suspect that a legal challenge might be imminent.
Title Property and Assets
You’ll also need to ensure that all trust property is correctly titled after the decedent’s death. In cases where the grantor was not serving as his own trustee, this titling will likely already have been addressed. If you were designated as successor trustee, however, you’ll need to take steps to get the trust’s assets titled in your name as trustee so that you can properly manage and distribute that property. This must be done for all real property like real estate and vehicles as well as other assets like stock broker accounts and bank accounts.
As with probated wills, the decedent’s debts must be paid. That responsibility falls to the trustee. You should provide notice to known creditors, and take steps to provide a general notice to any unknown creditors who might wish to levy claims against the estate. You’ll also need to evaluate these claims to determine their validity. All valid debts must be paid using trust assets. Depending upon the nature of the assets held by the trust, you may need to liquidate property to raise the funds needed to settle those debts.
Taxes are another issue that must be addressed. It’s important to recognize that trusts have their own tax concerns, including estate tax liability when applicable. You’ll need to ensure that any income tax returns are prepared and filed as necessary, and ascertain whether the trust owes estate taxes. It’s generally a good idea to retain a tax professional to help sort out these tax issues and to help with any return preparations.
Maintain a Proper Accounting
As the trustee, your decision-making process may be questioned by confused beneficiaries or disgruntled heirs. To protect your interests and those of the trust, it is always important to maintain a proper system for recording your activities and transactions. You should have an accounting system that documents every activity that you engage in as you work to settle the decedent’s affairs. Include records of every deposit and withdrawal from the trust, every investment decision you’ve made, and any payments that you’ve made using trust funds. To ensure that your accounting system is sufficient, you should consult with a trust administration lawyer.
Distribute assets in accordance with trust terms
The terms of the trust will dictate how assets are to be distributed to beneficiaries and may provide other important instructions about their management. Be diligent about following those instructions, so that you can avoid controversy and conflict. As a rule, distributions should be made only after debts and taxes have been assessed and settled, to ensure that those obligations are properly met. Some trusts may provide you with greater discretion about distributions. If the trust terms are unclear or you simply need more advice about how to proceed with distributions, be sure to contact a trust lawyer for assistance.
If you have questions regarding trusts or any other trust administration matters, please contact the experienced attorneys at the Law Offices of Mary A. Miller, P.C. for a consultation. You can contact us either online or by calling us at (914) 939-6565. We are here to help!