Trusts are among the most popular additions to an estate plan, in part because a trust can benefit the most basic of estate plans but can also be a valuable addition to a complex estate plan. When the Grantor (the person who creates the trust) creates the trust, several important decisions must be made. Chief among those decisions is the appointment of a Trustee to manage trust assets and oversee the administration of the trust. The prospect of serving as a Trustee can be an overwhelming one. To help get you started, the Long Island attorneys at Eghrari Law Firm discuss how to navigate trust administration for the first time Trustee.
Understanding the Role of Trustee during Trust Administration
When creating a trust, the Grantor has the ability to appoint anyone he or she wishes to be the Trustee. If a Grantor appointed you to be the Trustee, it is crucial to understand the important role you play in the administration of the trust. It also means that the Grantor has considerable trust in you and your abilities. The Trustee holds a fiduciary position during the administration of a trust, meaning that the Trustee must exercise the utmost care when managing and investing the trust assets, always acting in the best interests of the beneficiaries. Along with understanding the ethical and legal duty you have undertaken as Trustee, you should also know that a Trustee can be held personally liable for serious mistakes made during trust administration. Consulting with an experienced trust administration attorney throughout your role as Trustee is the best way to ensure that you do not make a serious mistake; however, it may also help you to have some guidelines for a first-time Trustee, such as:
- Thoroughly Review the Trust Agreement: Read the entire trust agreement several times to ensure you understand the terms because they dictate how the trust must be administered. Consult a trust administration attorney to make sure you are clear and/or if you need clarification.
- Maintain Detailed Records: Document all trust activities comprehensively to provide transparency for beneficiaries and to protect yourself in case of litigation. More is better when it comes to keeping records during the administration of a trust.
- Invest Wisely: As a Trustee, your legal duty is to invest trust assets prudently, prioritizing the protection of the trust principal over increasing the value of assets. Avoid risky investments unless explicitly directed by the trust terms.
- Ensure Taxes Are Filed and Paid: A trust is a separate legal entity and is, therefore, typically required to file annual tax returns. As the Trustee, it is your responsibility to know what taxes must be paid, calculate the taxes due, and ensure that they are paid in a timely manner.
- Do Not Administer the Trust Without Professional Advice: Although you are not legally required to work with an attorney or a financial advisor, it is in your best interest and in the best interest of the beneficiaries for you to do so.
- Do Not Neglect Communication with Beneficiaries: Beneficiaries have the right to be informed about trust matters. Maintain regular communication and address any questions or concerns promptly.
- Avoid Self-Dealing: You are entitled to a fee for your services as the Trustee; however, you must be careful not to engage in transactions that benefit you personally because it could be viewed as self-dealing which could lead to personal liability.
- Prevent Conflicts of Interest: Avoid personal conflicts that could impact your actions as Trustee, including personal business dealings with the trust or relationships with beneficiaries.
Do You Need Assistance Acting as the Trustee during Trust Administration in New York?
For more information, please join us for a FREE estate planning seminar. If you need help serving as a Trustee, contact the Long Island trust administration attorneys at Eghrari Law Firm by calling us at 631-265-0599 to schedule your appointment.
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