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Trust Administration Matters
If you have never served as a fiduciary before, it might feel somewhat daunting to be appointed to serve as the trustee of a trust. This is true whether the trust is created under a will (i.e., a “testamentary trust”) or is an irrevocable trust created under a revocable living trust, only after the maker of that trust dies.
It is preferable it the person establishing the trust notified you in advance of your appointment. If they did, then you should ask for a copy of the legal document appointing you and ask to have the preparing attorney provide you with an overview and address your questions. It is far better to know the responsibilities you will be taking on and politely refuse the appointment now, than it is to bail out when the appointment takes effect later. But first, what are some of those responsibilities?
A trustee may be a person or a financial institution, or both. The trustee holds legal title to property for the benefit of another and acts according to the terms of the trust. The trust document will identify who the trustee is. If the person who set up the trust was the initial trustee (as in a revocable living trust), then you might be named as successor trustee to administer the trust, when the original trustee becomes incapacitated or dies. For example, John might set up a living trust and put all his assets into the trust. He is the initial trustee. John handles all the administrative matters of the trust during his lifetime. When John dies, the person and/or institution appointed as his successor trustee assumes complete control.
If a trust appoints you as the successor trustee, you do not have to do all the work yourself. Handling the assets of another can monopolize your time, so many people hire and supervise specific professionals to do some or all the work. For example, you may have an accountant take care of the taxes. Alternatively, the trust may authorize you to appoint an institutional trustee to handle all the “heavy lifting” responsibilities, with you overseeing that trustee.
The specific actions that a trustee must take require the utmost integrity and care, including the following responsibilities:
- Read the trust agreement. Make sure you understand what the trust directs you to do. Get professional advice, if you have questions. You need to know who the beneficiaries are, what they are supposed to receive and when you must make distributions to the beneficiaries.
- Marshal the assets. In other words, you need to find, secure and value all trust assets as soon as possible. You may be required to file a claim to collect certain assets, like the proceeds of life insurance policies. You may need to hire a professional appraiser to value some assets, like the contents of the home, jewelry and vehicles.
- Identify and pay all final expenses, personal and trust taxes and legitimate debts of the decedent. Some bills must be paid promptly. You also must provide proper notice to known and likely creditors.
- Distribute assets. Follow the trust agreement carefully, when making distributions to beneficiaries. Be prepared to say “no” to beneficiaries, when they demand distributions that are not authorized by the trust.
- Terminate the trust. After paying all expenses, debts, taxes and distributing all trust assets (if the trust so permits), you can terminate the trust and conclude your duties as trustee.
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