Learning that you have been appointed as a Trustee can be both an honor and a daunting responsibility, especially if this is your first experience in the role. As a Trustee, you are tasked with managing trust assets and carrying out the wishes of the Grantor. Although each trust has unique provisions, there are general steps and guidelines that can help you as you begin. With that in mind, the Los Angeles attorneys at Schomer Estate & Wealth Advisors explain five steps for every Trustee to take soon after being appointed.
Understanding the Basics of a Trust
Before diving into the specific tasks of a Trustee, it helps to grasp the foundational elements of a trust. At its core, a trust is a legal arrangement in which one party, known as the Grantor, transfers assets to another party, the Trustee, to hold and manage for the benefit of designated beneficiaries. Trusts come in different forms but generally fall into two main categories: testamentary trusts and living (or inter vivos) trusts.
A testamentary trust is established in the Grantor’s Last Will and Testament and only comes into effect after the Grantor’s death. On the other hand, a living trust becomes active while the Grantor is still alive and can be structured as either revocable, allowing the Grantor to amend or dissolve it, or irrevocable, where changes are generally restricted after its creation.
Key Steps to Take as a New Trustee
The position of Trustee comes with a variety of duties, from managing and investing trust assets to ensuring compliance with the trust terms. Lack of preparation or knowledge about these duties can lead to errors that could potentially compromise the trust. Here are five essential steps for new Trustees to consider taking immediately:
- Carefully Review the Trust Agreement: Your first step should be a thorough review of the trust agreement. This document contains the instructions left by the Grantor, outlining how the assets should be managed and the purpose of the trust. Take the time to read through it multiple times, focusing on both the overarching goals and specific directives. If you are ever uncertain about what a decision requires, refer back to this document to ensure that all actions align with the Grantor’s intentions.
- Seek Guidance from a Trust Administration Attorney: Given the legal complexities of managing a trust, consulting with an attorney who specializes in trust administration is highly recommended. A knowledgeable attorney can clarify any uncertainties you have about the trust’s provisions, as well as guide you on state and federal legal requirements. Many Trustees retain legal counsel throughout the administration process to ensure compliance and protect themselves from potential liability.
- Transfer Assets into the Trust: In many cases, certain assets may still need to be transferred into the trust after you have assumed the role of Trustee. The trust agreement might specify which assets are included, but if the instructions are unclear, an attorney can assist in identifying and properly transferring these assets. Funding the trust appropriately is essential, as it impacts your ability to fulfill the trust’s purpose and meet the beneficiaries’ needs.
- Open a Dedicated Trust Bank Account: Since a trust is a distinct legal entity, it requires its own bank account for paying expenses and managing income. This helps separate the trust’s finances from your personal finances, ensuring clearer accounting. As a Trustee, you are responsible for meticulous recordkeeping, tracking all transactions, distributions, and other financial activities related to the trust. Setting up a reliable system early on can streamline this process and help avoid complications.
- Communicate with Beneficiaries: Another important aspect of your role as Trustee is maintaining communication with the beneficiaries. Keeping beneficiaries informed about the trust’s status and key decisions not only fulfills your duties but also helps build trust and transparency. Starting this communication early by reaching out to introduce yourself and explain your role can set a positive tone for future interactions.
Do You Need Help with the Steps a Trustee Should Take?
For more information, please join us for an upcoming FREE seminar. If you need in your role as Trustee, contact the experienced Los Angeles trust administration attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
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