So what happens when a spouse passes away with the former sub-trust estate plans from 20+ years ago? The trust administrator endures headaches and could spend a lot of time on unnecessary sub-trust allocations or administration complications.
Gerontologist Mary Winners outlines how to prepare critical documents that provide guidelines for the care of an aging family member. Winners uses the acronym GIFT as a simple way to trach the process. “G” is for gathering information. The “I” is for involving everyone – professionals, family members and so on. The “F” is for follow through on everything, especially all document requirements. Lastly, “T” is a reminder that family members need to tell everyone where all the documents are kept, as well as any other pertinent information.
To watch Forms 101: Mary Winners on Important Documents, click here.
To get a better grasp of the trust administration process, it is important to have at least a basic understanding of what a trust is and how it can function in the estate planning process. A trust is a legal mechanism frequently used in estate planning, not only to manage property assets during a person’s lifetime, but also to distribute assets after death. A trust can distribute estate assets to several different people or entities and also set conditions as to when and how much each beneficiary will receive.
A trust can be a valuable tool in your estate planning in the right circumstances, and is critical to carrying out your wishes when you pass away. Trusts can give you the ability to immediately transfer assets and provide for beneficiaries without the need for probate. A trust sets up a legal relationship in which property or assets of the grantor are held by the trustee for the benefit of the beneficiary.
Trustees have a large number of duties and responsibilities that carry legal and other consequences if breached. When there are two or more people acting as trustee at the same time there can be complications. Each co-trustee is bound by the duties of participation and prevention. In other words, they must divide up the work between themselves but each are still accountable for the actions of the other to redress a breach of the trust.
It is essential that a trustee exercise an extreme amount of caution when dealing with the trust and its assets. The personal duties of a trustee start with the most important: never, ever, under any circumstances commingle estate funds with the trustee’s personal funds. This is an essential component of the duty to avoid a conflict of interest. A trustee must be aware of and avoid any situation that creates a conflict of interest with the terms of the trust and the duties of the trustee.
The duty of loyalty includes the duty to deal impartially with all beneficiaries. This can be especially challenging if there are many beneficiaries each with different wants and needs. It is further complicated when the trustee is also a beneficiary. Above all, the terms of the trust dictate how the trustee must proceed with regard to the beneficiaries. When the trust documents are not explicit the trustee must use their best judgment to perform his job.
The beneficiaries of the trust are those who enjoy the benefit of a trust’s assets. Beneficiaries may include the spouse, children, associates or other family members of the creator of the trust. Non-profit organizations, religious institutions and other charitable entities as well as businesses may also be beneficiaries. The Trustee has certain duties to all the beneficiaries of the trust, which may become more complicated when there are different classes of beneficiaries or when the trustee is also a beneficiary. One very important duty is the duty of loyalty to the trust’s beneficiaries.
This is the third article in a series detailing the duties of a trustee. We have explored the duty of a trustee to comply with the terms of the trust instruments as well as the duties to control trust property and make it productive. This time I will address the duty to enforce claims the trust has against others and to defend actions against the trust. Before taking on the responsibility of acting as a trustee it is crucially important that you fully understand all the legal duties that come with the job.
Last newsletter I covered the duty of a trustee to comply with the terms of the trust instruments. This time I will address the duty to control the trust property as well as make the property productive. This means that the trustee has a legal obligation to ensure that the trust not only maintains value but also increases in value as appropriate within the terms set out by the trust instruments.