Trust attorneys will agree that a trust is a valuable estate planning tool. Trusts are useful in minimizing estate taxes and in avoiding costly probate. There are actually many benefits. But, when it comes to trust administration, it is equally important to understand what is involved and to select the right person or entity to serve as your trustee.
The legal definition of a trust
Trusts are basically fiduciary agreements between a trustee and the grantor, who is the person making the trust. Fiduciary simply means the agreement is based on the trust and confidence. The trust document gives the trustee the authority to manage the trust assets and distribute them to the named beneficiaries pursuant to the terms of the trust agreement. A trust may be used in place of a will, or may be used in conjunction with a will where it only applies to certain property.
Common goals of a trust
As people accumulate their wealth, grow their retirement accounts, make their investments and purchase assets, they are developing an estate that has value. A properly drafted trust can transfer those assets to a trustee in order to accomplish many of the following goals:
- protecting assets and ensuring their distribution according to your wishes
- protecting your estate from significant taxation and transfer fees
- managing your affairs in the event of incapacity
- facilitating charitable giving
What does trust administration involve?
Regardless of your trust goals, your trust will need to be administered, which involves investment management, implementing charitable giving strategies, risk management, insurance planning and business succession planning, when applicable. The trustee you select to manage your trust and its administration will be responsible for carrying out the terms of the trust.
Who should be my Trustee?
In choosing a trustee, many people will first look to their circle of family and friends. The person you select should be intelligent, trustworthy and diligent. Problems can arise when the trustee fails to perform his or her duties competently due to sloppiness, neglect, dishonesty or inattention to detail. This can not only harm the beneficiaries, but also cause legal troubles for the trustee. For these reasons, some persons look beyond their families and friends to professional trustees, known as fiduciaries. Fiduciaries sometimes work in their own firms while others work for larger companies such as banks and financial services companies.
If you have questions regarding trust administration, or any other estate planning needs, contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us at (916) 437-3500.