What should I know before I agree to administer a trust?
The most important aspects of administering trusts are organizational skills and record keeping. Basically you need to track every dollar coming in and going out of the trust and make sure it goes to the right person at the right time. Whether you feel you are qualified to serve is another matter because managing a million dollar portfolio of actively traded stocks over 20 or 30 years requires different skills than management of a family farm or overseeing the needs of an aging parent.
Trusts can be simple or very complex and the timing of when you need to start to serve as trustee can require a little or a lot of your time. Unless you are personally knowledgeable about trusts, then I suggest you put together a team of professionals to help you with trust administration. Most trusts provide that professional fees can be paid from the trust.
I suggest you consult an attorney trained in trusts to answer your questions and give you the information you need to make an informed decision on whether to serve or not, that often means the attorney taking the lead and talking with you about things you don’t know to ask questions about. Ideally the attorney needs to read the trust, but that is not always possible because a family member may just be drafting the trust at this point and only called to ask if you were willing to serve as successor trustee. You want to be sure you have a good repoire with the attorney and confidence in his or her abilities to help you in the future. Knowing what, when, and how to administer a trust and deal with beneficiaries is essential and legal fees are monies well spent to ensure your success and avoid liability.
Talk with a CPA or accountant to see what needs to be done immediately and during the year from a tax standpoint. If you have been nominated as trustee in someone’s will there could be a lot to do after someone passes away including such things as paying bills, dealing with creditors, alerting government agencies and financial institutions to your new position, doing an inventory of trust assets, getting appraisals, dealing with beneficiaries etc.
A financial advisor can help you determine whether assets are in qualified or non-qualified accounts and what investments may need to be reinvested or need immediate attention because of RMDs. Some will also help you with initial organization.
In summary you need to be forthright about your willingness to devote sufficient time and attention to serve as a trustee and be willing to seek the professional advice that can give you confidence in dealing with beneficiary needs, filing tax returns, making wise investment decisions, transferring real estate, communicating with beneficiaries and funding any subtrusts. Serving as a trustee is real work, and not just an honor bestowed by someone you love. The qualities of honesty, dependability, common sense and caring will allow most individuals to do a good job as a trustee.
Disclaimer: Information contained in this column is meant to be of general information on frequently asked questions regarding disability, elder law, estate planning and probate law, and is not specific legal advice to a client. No attorney-client relationship is created by reading this column.