One of the most common additions to a well thought out estate plan is a living trust. While a living trust can be used to further a seemingly infinite number and variety of estate planning goals, all living trusts have one thing in common, the need to appoint a Trustee to administer the trust. If you recently learned you were appointed to be the Trustee of a trust, and you have never before acted as a Trustee, you are probably unsure where or how to get started. With that in mind, the Rochester living trust attorneys at the Law Office of Michael Robinson, P.C. explain some common steps for a Trustee to take immediately after being appointed.
If you are unfamiliar with trusts, it helps to learn some basics. A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also referred to a Trustor or a Grantor, who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. All trusts are broadly divided into two categories – testamentary and living (inter vivos) trusts. Testamentary trusts are activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. A living trust, as the name implies, activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts.
Initial Steps for a New Trustee
Although a Trustee has a wide range of specific duties and responsibilities, the overall job of a Trustee is to manage trust assets and administer the trust according to the terms created by the Settlor. If you have never before served as a Trustee, the prospect can be rather daunting at first. To help you get started, the following are some common steps a Trustee should take after learning of the appointment:
- Review the trust agreement. The document used to create a trust is referred to as a “trust agreement.” The terms of the trust agreement govern the administration of the trust and must be followed as they are written unless a term is illegal, impossible, or unconscionable. As the Trustee, it is imperative that you understand those terms. To ensure that you do, read through the trust agreement several times. Along with directions for distributing trust assets, look for guidance regarding how the trust assets should be invested as well as the Settlor’s overall purpose for the trust.
- Retain the services of a trust administration attorney. Trust administration often involves complex financial strategies and as well requires knowledge of state and federal laws applicable to the trust. Retaining the services of an experienced trust administration attorney is the best way to ensure your success as a Trustee, particularly if this is your first time acting as a Trustee. Under certain circumstances, a Trustee can be held personally liable for mistakes made during the administration of a trust which is another powerful incentive to seek experienced legal guidance.
- Identify, inventory, and transfer trust assets. Every trust must be funded. In your case, the Settlor may have already funded the trust; however, it is not uncommon for assets to need to be transferred into the trust by the Trustee. Look to the trust agreement and consult with your attorney to identify all trust assets. Once identified, you should create a starting inventory and effectuate any transfers that need to occur.
- Open a bank account and set up recordkeeping. A trust is a separate legal entity. As such, the trust needs a separate bank account that you will use to pay trust expenses. As the Trustee, you must keep detailed records of all trust business. Before you begin administering the trust in earnest, set up a recordkeeping system.
- Introduce yourself to the beneficiaries. The beneficiaries of the trust are entitled to be kept apprised of all important trust business. Often, this is the first time a beneficiary has been involved in a trust, meaning the beneficiaries may be feeling just as overwhelmed and uncertain as you are. Communicating with the beneficiaries, in writing, can help them feel more at ease while also fulfilling your obligation to keep them informed.
Contact Rochester Living Trust Attorneys
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about acting as a Trustee, contact the Rochester living trust attorneys at The Law Office of Michael Robinson, P.C. by calling (585) 546-1734 to schedule an appointment.