What is trust administration?
Trust administration is applicable to living trust agreements. When a living trust is created, the person creating it is alive. Upon the trust creator’s death, the trust goes through a process known as trust administration.
Trust administration is very similar to probate in that the trustee is required to identify all of the trust assets and liabilities and to take on the responsibility of managing those assets and liabilities. Trust administration does not require court involvement; it is usually identified within the trust agreement by some instructions, which designate actions the trustee must take upon the death of the trust creator. Because no trust agreement is identical, it is important to avoid creating an error, which could affect the trustee’s liability.
This is why having an experienced attorney familiar with trust agreements is beneficial. They can help the trustee navigate the agreement and address any instructions that the trust creator enclosed.
What is a trustee and how do they play a role in trust administration?
The trustee is responsible for administrating or handling the trust assets and income of the trust and maintaining the purpose of the trust. The trustee is tasked with taking care of the needs of the beneficiaries as stated in the trust agreement. The trustee is also responsible for protecting the trust, if necessary, to enforce claims for and against it in the court system. While serving as trustee, they must act in good faith, remain impartial to the beneficiaries, maintain good records of the trust, and never commingle trust assets with the trustee’s assets. The trustee carries a great responsibility and not everyone is comfortable taking on this responsibility. Before choosing a trustee, confirm that the person you are choosing is comfortable administering this trust on your behalf and that they possess the skills and patience needed.
Who chooses the trustee?
Choosing a trustee is a very important decision that is to be made by the person creating the trust. They are given the responsibility to care for your assets and your beneficiaries. Some people are better suited to act as trustee over others. Understanding the job of the trustee will help you choose the best person.
When choosing a trustee, seek out a person who is honest with a stable lifestyle. The trustee will have to maintain a relationship with the beneficiaries so their ability to communicate effectively is also important. Good judgment is another quality you should look for. The ability to make good choices in order to protect the trust is vital, even if that requires seeking legal counsel or an accounting/financial expert to assist with the trust needs. In the event you still need your attorney to act as trustee, it is advisable to seek the advice of a second attorney to avoid any conflict of interest.
Because the trustee is a paid position, it is also important to confirm that they are willing and capable to take on the responsibility. There are potential tax benefits if the trustee resides in Florida. Due to the responsibilities, it is also beneficial to have a trustee living locally. The last thing to consider is the age of the trustee. Try to avoid choosing a trustee who is older than you.
What is a successor trustee?
In the event the trustee is no longer capable of handling the affairs of the trust, then the next trustee, known as the successor trustee, steps in and begins administering the trust. The original trustee no longer has any authority over the trust and the successor trustee takes on all of the responsibility.
For the successor trustee to step in, the original trustee must be incompetent and provide proof of incompetence with a written opinion of a doctor, psychiatrist, or court judgment. The required proof of incompetence is in some ways a disadvantage and can serve as a roadblock if the beneficiaries have needs requiring quick action. The proof of incompetence slows the process of implementing the successor trustee to the position of trustee.
What is a co-trustee?
When a trust maker appoints the trustee, they may also choose co-trustees, alternate trustees, and successor trustees. Co-trustees have the power to act individually on behalf of the trust in the event one trustee is unavailable.
The best example of a co-trustee is if one is hospitalized or unable to administer the needs of the trust, then the other trustee steps in and acts with the same authority on behalf of the trust. In some trusts, the use of a co-trustee is designed as a check and balances approach, which requires the co-trustees to sign checks together to avoid mishandling the trust.