A trust agreement is among the most common additions to a comprehensive estate plan. When a trust is created, the person creating the trust must appoint a Trustee. The overall job of a Trustee is to administer the trust. If you recently learned that you were appointed as the Trustee of a trust, the prospect of serving in that position can be a bit daunting. To get you started, the Essex Junction trust administration attorneys at Unsworth LaPlante, PLLC discuss what is involved in trust administration in Vermont.
Trust Agreement Basics
A trust is a legal arrangement that allows assets to be protected and controlled by a Trustee for the benefit of a third-party or parties. The person who creates a trust is referred to as the Settlor, Trustor, or Grantor. A trust can be administered during the lifetime of the Settlor in which case it is known as a “living trust” or after the death of the Settlor in which case it is a testamentary trust. Living trusts can also be revocable or irrevocable. All trust, however, require a Trustee to administer the trust. The Settlor chooses the Trustee or Trustees and creates the trust terms.
Duties and Responsibilities of a Trustee
The Trustee of a trust is in a fiduciary position, meaning that the Trustee must use the utmost care when handling trust assets and must make all decisions with the best interest of the beneficiaries in mind. While the overall job of a Trustee is to administer the trust, the duties and responsibilities that go along with trust administration are numerous and varied, including things such as:
- The terms of the trust agreement dictate how the trust should be administered. The Trustee must understand those terms and follow them without deviation unless a term is illegal, impossible, or unconscionable. A Trustee must follow the trust terms even if the Trustee disagrees with a term.
- The Trustee is responsible for investing the trust assets to help the principal grow. Investments should be low risk (unless the terms say otherwise) with protecting the trust principal as the number one goal.
- A Trustee has a duty to keep trust beneficiaries apprised of trust business.
- Again, the terms of the trust agreement should be followed regarding distribution of trust assets. Sometimes, however, a Trustee has authority to make discretionary distributions in which case the Trustee will have to decide whether to make a distribution.
- A Trustee can be held personally liable for mistakes made while administering a trust. For this reason and others, a Trustee should always keep detailed records of all trust business, including distributions, payment of trust bills, and time spent administering the trust.
- A trust is a separate legal entity and is potentially subject to taxation. Whether the trust must file a tax return and/or pay taxes will depend on the type of trust, the value of trust assets, and other variables; however, the Trustee of the trust is responsible for calculating taxes, filing tax returns, and paying any taxes due.
Trust Administration Law in Vermont
In the State of Vermont, Title 14A of the Vermont Statutes governs the duties and powers of a Trustee. Specific questions that arise during the administration of a trust should be viewed in light of that statute. Unless you have a financial and/or legal background, it is also wise to consult with a financial adviser and an experienced trust administration attorney to ensure that you do not make costly mistakes that could open you up to personal liability.
Do You Need Help with Trust Administration in Vermont?
For more information, please attend one of our upcoming FREE webinars. If you need help administering a trust in Vermont, contact an experienced Essex Junction trust administration attorney at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.