Were you recently informed that someone named you as the Trustee of a trust he or she created? If this appointment came as a surprise to you, you are not alone. Ideally, when a trust is created, the trust creator should discuss the position with a potential Trustee before naming that person in the trust agreement. Unfortunately, however, that doesn’t always happen. Now that you find yourself as a Trustee, do you need an attorney to help you? The Riverside trust lawyers at Sandoval Legacy Group, A Professional Law Corporation explain why retaining an attorney to help you administer a trust is usually a wise decision.
Trust Fundamentals for the New Trustee
As a new Trustee, it is a good idea to learn some basic fundamentals with regard to trusts. A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Trustor, also called a Settlor 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 must have at least one beneficiary but may have an unlimited number of beneficiaries. A trust may have both current and future beneficiaries. If the trust is a testamentary trust, it means the trust will not activate until the Trustor’s death. If the trust is a living trust, the trust becomes active as soon as all formalities of creation are in place.
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 Trustor, 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. An independent mediator can be engaged if necessary.
- 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 the 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 a Riverside Estate Planning Lawyer 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 of these 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 or 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 Riverside Trust Attorneys
If you have additional questions or concerns regarding the administration of a trust, contact the experienced Riverside trust attorneys at Sandoval Legacy Group, A Professional Law Corporation by calling (951) 888-1460 to schedule an appointment.
Have a question? Ask Dennis.
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