The trust administration process can present challenges for the trustee. You may find yourself a trustee for a parent during their lifetime or you may be listed as a successor trustee to serve upon the settlor’s death. The trust agreement is a binding contract that sets forth your powers, duties, and legal obligations to those listed as a beneficiary. You are well advised to seek legal advice at the onset to fully understand the terms of trust, as well as requirements imposed by statute.
Once you decide to assume the role as trustee, the responsibilities of the trustee include the following:
- Notification. As trustee of the trust, which became irrevocable upon the settlor’s death, you are required to notify all trust beneficiaries of your position of trustee, and their right to receive a copy of the trust and an annual accounting.
- Retitling of assets. As to assets in trust, it is your responsibility to retitle the assets into your name as trustee of the trust, and never commingled with your own funds. This will require the opening of new accounts and transferring or closing out of the existing account(s). Prior to retitling of the account, you may be required to obtain an EIN for the trust.
- Management of trust estate. Your responsibilities as trustee are to distribute certain assets in kind or as specified in the trust agreement with the remainder to be liquidated to pay expenses and final distributions to the beneficiaries. If the trust requires you to hold and invest funds, it is important that you determine appropriate and diversified holdings. If you do not formally delegate investment management to an agent, you should certainly look to retain an investment advisor for the trust portfolio. Whether you delegate investment management or hire an investment advisor, you still have the duty to periodically review the statements and address any concerns.
- Payment of debts/distributions. It must first be determined that there are sufficient funds available to pay all the debts, and whether such debts and distributions are to be paid from trust. Some debts are to be paid from the probate estate and the trust may not be required to pay them. As trustee, you may be liable to reimburse the trust for payments made in error and not otherwise authorized under the trust.
- Taxes. As the trustee, you are required to file appropriate tax returns. Depending on the property involved, this can include filing a 1041 for the trust separately or in combination with the probate estate tax filing. The trust may further direct estate taxes to be paid from trust.
- Distributions. As trustee you are required to proceed to administer the trust and make distributions to the beneficiaries as stated in the trust. While no time frame is usually imposed in the trust, not taking action with regard to trust assets or distributing funds is often the basis for which a beneficiary would file an action to remove the trustee.
Call For Experienced Trust Administration Advice
Learn more about how one of our experienced lawyers can help you and your family navigate through the trust administration process in a free initial consultation. Call 440-884-4300. To contact us through email, please complete the brief form. We are conveniently located in the Cleveland suburb of North Royalton, Ohio, near Parma, and we serve clients in Cuyahoga, Medina and Summit counties.