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.
The duty to control and preserve trust property means that the trustee must know what is contained within the trust. It is important that the trustee take immediate action to identify the assets of the trust. This can sometimes be a job of serious detective work, such as finding evidence in tax returns that dividends have been received. The trustee will open an inventory by locating, organizing and securing assets such as jewelry, art, bank and investment accounts and other valuables. This can include changing titles, changing addresses and verifying adequate insurance coverage.
Once the contents of the trust are identified the trustee must ensure that all these assets are serving the trust. It is the trustee’s duty to keep the property of the trust productive for the benefit of the trust beneficiaries. If an asset is losing value, it may make sense to sell it. Likewise, if an asset, such as a vacant piece of property, is not producing income the trustee must decide whether to keep the property and make it productive or sell it. However, the trustee must consider all factors. The sale may very well trigger capital gains tax. A trustee should weigh the cost of improvement against the projected increase in value. In addition, liquid assets must earn “reasonable” interest.
A trustee may wish to engage a professional estate service to help carry out their trustee duties. Lindsay Leonard of Santa Barbara Estate Services can provide such assistance if you or someone you know needs this kind of support.
www.SantaBarbaraEstateServices.com
