If you were recently appointed to be the Trustee of a trust and you have never served as a Trustee, you likely have several questions about your duties and responsibilities as a Trustee. Whether or not you need to hire an attorney to help you administer the trust is probably at the top of that list of questions. There is no legal requirement obligating a Trustee to retain the services of an attorney; however, a Loveland area trust administration attorney at Zimmer Law Firm explains why you might need an attorney if you are a Trustee.
Trust Basics for the Trustee
You probably have some idea what a trust is and how one operates already; however, if you have been appointed as the Trustee of a trust it cannot hurt to learn some trust 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 called a Maker or a Grantor, who transfers property to a Trustee. The Trustee holds that property for the trust beneficiaries. The beneficiary of a trust can be an individual, an entity (such as a charity or political organization), or even a family pet. A trust must have at least one beneficiary but may have an unlimited number of beneficiaries. A trust may have both current and future beneficiaries. If the trust is a testamentary trust, it means the trust will not activate until the Settlor’s death. If the trust is a living trust, the trust becomes active as soon as all formalities of creation are in place.
What Is Involved in Administering a Trust?
Once you have a better idea of what the duties and responsibilities of a Trustee are you will likely also understand why having an experienced trust attorney by your side is a good idea. The overall job of a Trustee is to manage the trust assets and administer the trust using the terms created by the Settler. To successfully fulfill those duties and responsibilities, a Trustee must:
- Protect the assets held by the trust. As the Trustee, you are responsible for managing and protecting all assets held by the trust. This could include anything from reconciling bank statements to maintaining real property.
- Understanding the trust terms. Unless the terms of a trust are impossible, illegal, or unconscionable, the Trustee is required by law to use the terms, exactly as written by the Settlor, to administer the trust. To properly administer the trust, you must be able to understand, and follow, all the terms of the trust.
- Investing trust funds using the “Prudent Investor Standard.” You are responsible for managing someone else’s assets, putting you in a fiduciary role. Guarding the principal should always be the primary focus with a return on investments secondary.
- Mediating conflicts among beneficiaries. Conflicts and disputes among beneficiaries can occur during the administration of a trust. As the Trustee, you must remain neutral and try to resolve conflicts before they escalate which could result in litigation.
- Distributing trust funds to beneficiaries. The trust terms dictate how and when to distribute the trust assets; however, you may also have the discretion to make additional distributions which gives you a considerable amount of power.
- Keeping detailed trust records. Ultimately, the Trustee is accountable for the success, or failure, of the trust. Keeping detailed records of everything involved in administering the trust is crucial in case decisions you made are ever questioned.
- Preparing and paying trust taxes. A trust is a separate legal entity which means the Trustee must see that the trust files a tax return every year and pays any taxes due.
Do I Need an Attorney to Help Me?
As you can see, administering even a relatively simple trust is time-consuming and often requires at least a rudimentary understanding of legal and financial concepts. Because a trust attorney is familiar with all aspects of trust administration, it only makes sense that a Trustee can benefit from working with an attorney. Another important consideration is the fact that a Trustee can be held personally liable for mistakes made during the administration of a trust. Having a trust attorney to guide you and advise you will dramatically reduce the likelihood of making a serious mistake during the administration of the trust.
Contact a Loveland Area Trust Administration Attorney
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about administering a trust, contact an experienced Loveland area trust administration attorney at Zimmer Law Firm by calling 513-721-1513 to schedule your appointment today.