Becoming a Trustee for the first time can be a daunting experience, leaving you with a sense of uncertainty about where to begin. Trust administration itself is a nuanced process that varies from one trust to another, but there are fundamental steps that can serve as a guide for newly appointed Trustees. To assist those navigating this complex role, the Essex Junction trust administration attorneys at Unsworth LaPlante, PLLC discuss five important steps for individuals stepping into the role of a Trustee for the first time.
For those unfamiliar with trusts, a foundational understanding is essential. A trust is a unique relationship where property owned by one party is held by another party for the benefit of a third party (or parties). The individual creating the trust, known as the Settlor (or Trustor or Grantor), transfers property to a Trustee, who holds it on behalf of the beneficiaries. Trusts can be broadly categorized into testamentary and living (inter vivos) trusts. Testamentary trusts are activated by a provision in the Settlor’s Last Will and Testament, while living trusts come into effect during the Settlor’s lifetime and can further be classified as revocable or irrevocable.
Key Steps for a New Trustee
As a Trustee, your primary responsibility is to manage and invest trust assets in accordance with the terms established by the Settlor. Inadequate preparation is a common cause of trust failures. If you find yourself newly appointed as a Trustee, taking the following five steps should provide you with a solid foundation on which to begin your trust administration journey:
- Speak to an experienced trust administration attorney. Managing a trust requires a Trustee to understand and adhere to all relevant laws. Seeking guidance from a skilled attorney is the optimal approach to guarantee compliance with your legal obligations. The attorney can also provide clarification on any uncertainties you may have regarding the trust agreement. Many Trustees choose to enlist the services of an attorney to navigate the entire trust administration process because along with gaining invaluable assistance, having an attorney onboard during the administration of the trust acts as a safeguard against potential personal liability arising from Trustee errors.
- Thoroughly read the trust agreement. Created by the Settlor when the trust is established, a trust agreement outlines the terms and provisions to be used during the administration of the trust. As the Trustee, you should read through the trust agreement several times to ensure that you understand the main points of the document. Then read through it several more times to find the small details that will be important as you administer the trust. The agreement should include the trust purpose as stated by the Settlor along with information about the trust assets, beneficiaries, and other important information. All decisions you make should be made in furtherance of the trust purpose.
- Fund the trust. The Settlor may have already funded the trust; however, it is also possible that assets owned by the Settlor still need to be transferred into the trust by the Trustee. The trust agreement may provide guidance, or you may need to consult with an attorney to determine which assets are intended to be used to fund the trust.
- Open a bank account and begin recordkeeping. Because a trust is a separate legal entity, you need to open a bank account to pay trust expenses. In addition, a Trustee must keep very good records of all trust business. Setting up a recordkeeping system early on helps to fulfill this trust administration responsibility.
- Communicate with beneficiaries. As the Trustee, you are also required to keep beneficiaries apprised of trust business. With that in mind, it is a good idea to reach out to all the beneficiaries early on and let them know you will be administering the trust.
Do You Need Help Completing the Steps a New Trustee Should Take?
For more information, please attend one of our upcoming FREE webinars. If you have additional questions or concerns about administering a trust, contact the experienced Essex Junction trust administration attorneys at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.