Trust Administration

Effective trust administration is necessary if the grantor’s goals are to be accomplished. During the administration of the trust, the trustee is bound by the terms of the trust, and at times, state law.

Depending on the provisions of the trust and state statutes, a trustee is generally held responsible to observe fiduciary duty as follows:

• Loyalty to the trust beneficiaries.  The trustee must generally act in the beneficiary’s best interests when making decisions affecting the trust’s assets.
• Impartiality to the trust beneficiaries.  The trustee is vested with the duty to administer the trust in a way that reflects no bias toward one beneficiary over the other.
• Growth of the assets.  The trustee must act to protect and to grow the assets with reasonable care, caution, and concern.  This could mean a diversity of investments, regular reviews of the dividends from investments, consideration of the purpose of the trust, or consultations with financial professionals, so that the assets do not lose value.
• Protection of the assets.  The trustee is charged with securing assets, such that they are not lost or stolen.  The trustee should obtain insurance, for instance, if the assets are vulnerable to damage.
• Separation of trust and private assets.  The trustee must not commingle trust assets the trustee’s own assets and must follow protocol when payments for services to the trustee are rendered.
• Avoidance of conflict of interest.  The trustee is answerable when the trustee’s conduct reflects self-dealing (for instance, using trust assets for personal reasons, such as the issuance of loans to the trustee, or attempting to cover bad investments to avoid liability).  There also may be conflict of interest arising if the trustee is also a beneficiary of the trust.
• Recordkeeping and accounting to beneficiaries.  The trustee must maintain accurate and current records and report to the beneficiaries regarding the standing of expenditures and the assets.
• Payment of trust expenses.  The trustee must pay legitimate expenses as they arise in a timely manner to avoid damaged credit, late payment fees, and court action with regard to default.  The trustee should not use the trust assets to pay personal expenses, thinking that later these funds can be easily replaced.
• Reports to IRS and payment of taxes due.  The trustee is responsible for filing trust tax returns and rendering payment to the IRS as necessary.
• Distribution of income.  The trustee must distribute the assets of the trust as called for by the trust document.

Your responsibility as a trustee is heavy. You can be held personally liable if you mismanage a trust.   Consult with our tax boutique if you are concerned about your ability to administer the trust effectively.  Our team of tax professionals is well-versed in trust administration, and we will work with you to protect both yourself and the trust while ensuring that you are fully informed when dealing with the finances of the trust.

We will review the trust provisions and records, and we will advise you about items of concern that we note.  We will also assist you with decisions involving the trust, trust disclosures to the beneficiaries, and tax filings.  If your administration policies are challenged, we will appear on your behalf before other attorneys or the court.

Let Law Offices of Christy Lee, P.C., help you ensure that your trust is administered professionally, with an eye toward asset preservation, protection, and growth.