Trust Administration: How to Ensure Your Trust is Administered According to Your Wishes
Trusts are powerful tools in estate planning. Every trust is a unique, customizable document that empowers its creator to establish a plan for the distribution of their estate. A well-crafted, professionally made trust can ensure that assets transfer smoothly from generation to generation. One of the most important, and commonly ignored, steps in ensuring a smooth transfer is the administration of the trust. Even the most detailed, superbly constructed trust can turn into an administrative nightmare if the proper steps are not taken. The following is a non-exclusive list of things that can be done to ensure your trust is administered as intended.
Select the Right Trustee
The trustee is responsible for managing the trust assets and distributing them to beneficiaries. The selection of the right trustee is an important step in assuring the trust is properly administered. Many people select a close family member, a spouse, or multiple co-trustees consisting of close friends and family members. A trusted family member or friend familiar with the settlor of the trust is often a suitable candidate for trustee. In situations where disagreement among beneficiaries or heirs is likely, it is often best to elect a neutral, third-party professional fiduciary to act as trustee. The neutrality of a professional fiduciary can help alleviate tensions among beneficiaries in disagreement. Professional fiduciaries can also ensure that the assets are distributed impartially, according to the settlor’s wishes.
Provide Instructions and Keep Interested Parties Informed
Trusts are private documents. A trust is not filed with the court or any other government entity after it is executed. Thus, it is important to inform beneficiaries and successor trustees 1) of the trust’s existence, 2) of the trust’s location, and 3) of the basic contents of the trust.
Many clients are surprised to learn that a trust is not filed with the court, it is a private document that remains in the hands of its creators. After a trust is executed, it is important to tell your beneficiaries and successor trustees of the existence of the trust. If your beneficiaries and successor trustees aren’t aware of the trust, they may not ever discover the existence of the trust. Further, it is important to keep the trust in a safe, known location. I also recommend storing the trust in the proximity of other records that will become important during the administration of the trust, such as relevant statements from financial institutions, deeds to real property, and relevant contact information.
Finally, I believe it is best to inform beneficiaries (or disinherited heirs) of the basic terms of the trust. Many disputes arise when beneficiaries (or heirs who believed they would be beneficiaries) are surprised by the terms of the trust. Explaining decisions in your estate plan during your lifetime allows your beneficiaries to process your decisions and understand the reasons behind them. When beneficiaries understand your intent, there is less likelihood of disagreement. The less disagreement there is the more efficient the administration.
Title Assets in Trust
Trusts only control the property that is held in the actual trust. Unlike a will, a trust cannot dictate the distribution of assets that were never titled in the name of the trust. Thus, if a trust is not properly funded during the settlor’s lifetime, it will be ineffectual in controlling the distribution of the estate. Remember to keep assets such as real property and bank accounts titled in the name of the trust. Having assets titled in the name of the trust after the settlor’s death can cause serious delays and expenses to be incurred during administration. In order to avoid this, remember to keep trust funded.
Hire Professional Help
Hire professional help if you need help drafting a trust or if you want to assure your estate is in order. Professionals can also assist newly appointed trustees in administering the estate. Trustees should seek the help of counsel to make sure all legal requirements are met and that all the proper administrative steps are taken.
Proper administration of a trust is just as important as proper drafting of the trust. Poor administration and poor planning can lead to a deviation from the original settlor’s intent. To ensure your wishes are followed, contact the experienced attorneys at Naimish & Lewis for a consult today.
