Trust administration is the unsupervised procedure for transferring property from the decedent, who is the individual who has died, to the decedent’s beneficiaries as identified in a trust. A common question posed by many clients is: What is administration of the trust? This article will explain the basics.
What is expected of a trustee?
The services of a trustee are critical to successful trust administration. As the trustee, you are the person responsible for seeing to it that the provisions in the trust agreement are complied with. The trustee is also responsible for managing the assets that have been placed in trust, as well as maintaining accurate records of all transactions that involve the trust property.
What does it mean to be a fiduciary?
Trustees have a fiduciary duty to take only those actions that are for the benefit of the trust and its beneficiaries. Trustees are expected to always be honest in all dealings related to the trust. Trustees are also required to make sure all of the actions they take comply with the regulations established to protect beneficiaries from improper investment choices made by trustees. Ultimately, a trustee is expected not to violate their duties, and if they do, they can be held liable for those violations.
Using professionals for trust administration
In the face of the significant responsibility placed upon a trustee, it is very common for trustees to need advice or assistance from a professional as they carry out certain aspects of their responsibilities. This is most likely the case when it comes to investing the trust property. If you do not have experience with investments then it would be wise to seek the advice of a professional. The management of investments is the probably the most frequently litigated issue in Los Angeles trust administration.
Representing the right interests as a trustee
As the trustee and fiduciary, you are expected to always look beyond your own interests and comply with the terms of the trust document in each decision you make. Unfortunately, this can be more difficult than you may expect. Remaining impartial can be especially challenging when you have a relationship with any of the beneficiaries of the trust, or if you have any emotional connection to the family in general. Regardless of your relationships, as a trustee, you are expected to remain a neutral party in every transaction affecting the trust.
Necessary recordkeeping in trust administration
One important obligation the trustee has during Los Angeles trust administration is providing a complete and accurate reporting of all transactions that relate to the trust property. This is another frequent basis for litigation in Los Angeles trust administration. Therefore, it is crucial that, as trustee, you fully understand each of your responsibilities and the potential risks for liability that you could face. Each decision you make and action you take relating to the trust property needs to be documented. This is especially true for the decisions you make to approve or deny distributions of the trust property. As long as you keep an accurate accounting of those transactions, you will be able to defend your decisions and protect yourself from personal liability in the event of a dispute of any kind.
Compensation for work in trust administration
If you forget to discuss your fees up front, when that issue arises later it may be necessary for you to go to court to get the issue resolved. It is not uncommon for a trustee to serve for many years without being paid. Then, when the time and effort spent fulfilling the duties of a trustee have increased substantially, the trustee will then seek compensation. If compensation was not determined at the beginning, the beneficiaries may object to paying a fee now. That would mean court intervention would be necessary. Avoid this situation by determining trustee compensation up front.
Download our FREE estate planning worksheet today! If you have questions regarding estate planning, trust contests, or any other trust administration issues, please contact the Schomer Law Group either online or by calling us in Los Angeles at (310) 337-7696, and in Orange County at (562) 346-3209.
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