Trusts are frequently used in estate planning because of their flexibility and because of the numerous and varied estate planning goals that can be served using a trust. The Trustee of a trust is responsible for administering the trust as well as managing and investing trust assets. If you recently learned that you were appointed to be the Trustee of a trust, you may not know where to begin with administering the trust. To help get you started, let’s examine five important trust administration steps for the first-time Trustee.
Trustee Steps to Take When Administering a Trust
The overall job of a Trustee is to manage and invest trust assets and administer the trust according to the terms created by the Settlor. Among the most common reasons for a trust to fail is a Trustee who is ill prepared for the wide range of complex duties and responsibilities required of a Trustee. I you find yourself the Trustee of a trust, the following are steps you should take immediately upon learning of your appointment:
- Read through the trust agreement. All trusts are governed by the trust agreement used to create the trust. As the Trustee, you should read through the trust agreement several times to ensure that you understand the main points of the document. The agreement should include the trust purpose as stated by the Settlor. All decisions you make should keep be made in furtherance of that purpose. The agreement may also provide you with guidance regarding how the trust assets should be invested.
- Consult with an experienced and qualified trust administration attorney. Administering a trust requires you to understand, and comply with, all applicable laws. Consulting with an experienced and qualified attorney is the best way to ensure compliance with those laws. The attorney can also help to clarify any questions you have about the trust agreement. Most Trustee’s retain an attorney to assist during the administration of the trust, if for no other reason than to protect against being held personally liable for mistakes made as the Trustee. California has very specific procedures for providing notices to interested parties and government agencies. Failing to send these notice could result in lawsuits against the trustees seeking removal and/or damages.
- Transfer assets into the trust. Often, assets owned by the Settlor still need to be transferred into the trust by the Trustee. The trust agreement may provide guidance, or you may need to consult with an attorney to determine which assets are intended to be used to fund the trust.
- Open a bank account and begin recordkeeping. Because a trust is a separate legal entity, you need to open a bank account to pay trust expenses. In addition, a Trustee must keep exceptionally good records of all trust business. Setting up a recordkeeping system early on helps to fulfill this trust administration responsibility.
- Communicate with beneficiaries. As the Trustee, you are also required to keep beneficiaries apprised of trust business. With that in mind, it is a good idea to reach out to all the beneficiaries early on and let them know you will be administering the trust.
Please download our FREE estate planning checklist. If you have additional questions or concerns about serving as the Trustee during trust administration, contact us at the Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 or by filling out our online contact form.