Written By Lori A. Curtis
So, someone you loved created a Trust and named you as their successor Trustee. Now they have died and you are in charge. Now what?
The average person has little experience in administering a Trust but, as successor Trustee, you now have certain legal obligations and responsibilities to fulfill. If you do not do certain required actions, or if you do them incorrectly, then you may be personally liable for any mistakes you make.
The first step is to read the Trust carefully. We strongly suggest you have an attorney review the Trust as well to explain certain legal provisions in it you may not understand. The Trust itself will tell you how to proceed. In general, you will need to:
1. Identify Trust assets and liabilities;
2. Collect and manage Trust assets;
3. Pay debts, expenses of administration, and taxes; and
4. Distribute Trust assets to the beneficiaries or hold the assets in trust for their benefit, depending on the terms of the Trust.
Trust assets can include property or bank accounts owned by the Trust, but there may also be life insurance policies, annuities, and retirement accounts of which the Trust has been named as a beneficiary. You will need to create an inventory of the Trust assets and liabilities, and work with the Personal Representative (or Executor) of the Estate to determine if a probate will be necessary. Before the Trust assets can be distributed, they must first be used to pay all the Decedent’s debts, expenses of the administration, and taxes.
One of the most important requirements while serving as a Trustee is to keep complete and thorough records. These records should include dates, the person to whom payment was made or from whom payment was received, the nature of the payment, and the amount. If the Trust does not already have its own bank account, you should open a Trust account and run all payments and deposits through it.
As a Trustee, you are a fiduciary, which means that you have a legal duty of undivided loyalty to the beneficiaries and the creditors of the Trust. A fiduciary duty is an extremely high standard of care. You must be cautious and prudent in dealing with Trust assets. The Trust assets do not belong to you and must never be used for your benefit (unless you are also a beneficiary, in which case you should consult an attorney to make sure you deal fairly with all the beneficiaries). You will need to keep in regular contact with the beneficiaries to understand their needs and keep them apprised of the status of the Trust administration.
Warning: This is just a general overview of your duties and some of the actions you must take. This article does not describe all of your duties and is not a substitute for obtaining professional legal advice. Your duties and responsibilities are quite comprehensive. The trust administration process is a very time consuming and lengthy process, and if issues arise with selling real estate, if an estate tax return is required, if any beneficiaries contest the process, or other unforeseen issues arise, then the administration period may be significantly longer. We strongly suggest that you seek legal counsel to help you through the process.