Trusts are excellent estate planning tools that allow you to enjoy benefits while you are alive and pass on your legacy when you are gone. Although most people administer their own trust while they can, they will name a successor trustee to handle the administrative and fiduciary responsibilities upon the incapacitation or death of the trust creator.
Some common traits of good trustees include honesty, patience, and a sense of responsibility, duty, and fairness. Those are the qualities you should look for if you are appointing a successor trustee for your trust. Those are the qualities you will appreciate if you are the beneficiary of a trust.
Understanding the basics of trust administration will help you understand the trustee’s role with your trust or that of a loved one. John L. Shaw, Attorney at Law, helps clients in Temple City, California, as well as Pasadena, Rosemead, Alhambra, and Arcadia, create and administer trusts as part of their estate plans.
Trusts are legal contracts involving three different parties. There is the creator of the trust, the trustee who administers the trust, and the beneficiaries of the trust.
Trusts are attractive estate planning tools for many people. Trusts are not subject to probate. That means the terms, assets, and distribution of the trust remain private, unlike a will which becomes a public document when filed in court. Distribution of trust assets to beneficiaries generally takes less time and costs less money than probating the decedent’s estate.
The value of a trust lies in its administration. All the thought, resources, intentions, and carefully chosen words that comprise the trust are activated in its administration. Only then is the trust creator’s legacy fully realized.
Trustees begin their work when the trust creator dies. Their major role is to administer the trust in the way the creator wished. They have six key functions in the process:
The trustee identifies all beneficiaries of the trust. Beneficiaries will be named in the trust document; however, the trustee must locate and contact each of them to obtain certain information, such as full names, dates of birth, Social Security numbers, and addresses, required when filing the appropriate tax information.
The trustee pays all expenses related to the administration of the trust during the process. Expenses are paid from trust assets and require a detailed accounting.
The trustee must identify and pay any debts the trust owes. Debts must be paid before distribution of remaining assets to beneficiaries, so it is vital that the trustee ensures full and final payment of all debt.
Once all debts are paid, the trustee distributes the remaining assets of the trust as the trust creator specified in the document. The trustee bears the responsibility of ensuring the creator’s wishes for their legacy.
The trustee is responsible for timely preparation, filing, and payment of all taxes the trust owes. In fact, a trustee can be held personally responsible for interest and penalties charged for delinquent taxes.
The trustee is responsible for creating a reserve fund comprising enough assets of the trust to cover expenses, taxes, debts, and any other obligations of the trust.
A well-crafted trust document can make trust administration easier; however, they all require work on the part of the trustee. The trustee’s sole focus should be taking care of the legal obligations of the trust and honoring the wishes of the creator.
If you want to establish a trust or learn more about trust administration, contact the office today to schedule a consultation. Death waits for no one. Estate planning should not either.
Perhaps you are considering creating a trust of your own as part of your estate plan. Or perhaps you are the beneficiary of a trust and want to know more about the role of the trustee and how a trust is administered. Whatever your reason, John L. Shaw, Attorney at Law, can help you, just as he has helped clients preserve their legacies in Temple City, California, and beyond for more than four decades.