A trust is a legal structure that holds and manages assets provided by the person who created the trust – the grantor – on behalf of one or more beneficiaries. Managing the trust and its assets forms part of the trust administration process, overseen by an appointed individual or organization called a trustee. Trustees have various legal and fiduciary responsibilities imposed by the trust document governing the trust and by state law.
Being named as the trustee of a loved one’s trust can feel like an overwhelming obligation, but it’s not one you have to serve alone. An experienced trust administration lawyer from The Law Offices of Patricia Bloom-McDonald can help you understand your duties and authority and the actions you must take to manage the trust per the requirements of the trust document. Contact us today for a consultation with a trust administration attorney in Westport, MA, and let us provide you with the peace of mind you deserve.
What Is Trust Administration?
Trust administration refers to managing a trust per the trust document’s terms. Responsibility for trust administration falls to the trustee nominated by the trust document or a successor trustee appointed by the grantor (the person who created the trust), the trust’s beneficiaries, or the court. A trustee may rely on third parties to assist with various aspects of trust administration, such as accountants to help with bookkeeping, financial advisors to manage investments of trust assets, and attorneys to provide legal advice and representation.
The details of trust administration can vary between revocable and irrevocable trusts. In a revocable trust, the grantor may retain some authority over its management due to their inherent power to amend the trust document or revoke the trust entirely. In an irrevocable trust, the trustee solely assumes responsibility for trust administration, although the trust’s beneficiaries may have a say in a few matters.
Responsibilities of a Trustee
A trustee’s responsibilities and duties in administering a trust include:
- Acting according to fiduciary duties: The law imposes various fiduciary duties upon a trustee, including duties of loyalty, good faith, and fair dealing. These duties require trustees to act in the best interest of the trust and its beneficiaries, exercise reasonable diligence and judgment in managing trust assets, and treat all beneficiaries fairly.
- Managing and distributing trust assets: A trustee must manage assets placed into the trust and distribute principal and income from those assets per the trust document’s terms. A trust document may give a trustee detailed instructions on managing trust assets or leave various decisions to the trustee’s discretion.
- Maintaining financial and legal records: Trustees should keep financial accounts of the trust’s investments, expenses, tax liabilities, and beneficiary distributions.
- Communicating with beneficiaries: A trustee should keep beneficiaries updated on the trust’s status, provide periodic accountancy, and respond to beneficiaries’ information requests.
- Filing tax returns and handling compliance matters: Trustees must file the trust’s tax returns and pay taxes on income or capital gains generated by investing trust assets.
Key Aspects of Trust Administration
When an individual or organization becomes a trustee, steps in the process of trust administration will include:
- Reviewing the trust document: Trustees should carefully review the trust document and seek legal counsel as necessary to understand their responsibilities and authority.
- Notifying beneficiaries: A trustee should notify individuals designated as beneficiaries by the trust document of their status and rights.
- Inventorying assets: When a trustee assumes management of a trust, they should create an inventory of the assets placed in the trust, including the assets’ value and location (if applicable).
- Settling expenses and taxes: A trustee may pay trust administration expenses (e.g., legal or accountant fees) and taxes assessed on trust principal and income.
- Making distributions to beneficiaries: Trustees must distribute principal and income from trust assets as required or allowed by the trust document. A trust may require the trustee to distribute principal over time or only income generated by investing trust assets.
- Accounting and reports to the court: A trustee should keep detailed records of the trust’s operations, including the performance of investments, the income generated by the trust, the trust’s expenses and tax liabilities, and distributions to beneficiaries. Trustees may sometimes have to report their actions to the court.
Challenges of Trust Administration
Trust administration can create various challenges and issues for trustees, such as:
- Beneficiary disputes: A trustee’s actions can lead to legal disputes filed by beneficiaries, who may assert breach of fiduciary duty claims or start legal proceedings to remove the trustee or compel beneficiary distributions.
- Tax issues: Managing trust assets can create significant tax implications, including when trustees sell assets after gaining value or when investments generate income not used for expenses or beneficiary distributions.
- Fiduciary duty questions: A trustee may experience difficult situations involving their fiduciary duties, including resolving disputes among beneficiaries or questions regarding whether a specific action might benefit the trustee or another party at the expense of the trust or its beneficiaries.
- Interpretation of trust provisions: Trustees may face complex legal questions regarding the interpretation of the trust document’s provisions, including whether the document requires the trustee to take a specific action or the scope of the trustee’s discretion in undertaking various actions (such as the timing and amount of beneficiary distributions).
How a Trust Administration Attorney Can Help
An experienced trust administration attorney can help a trustee navigate their responsibilities, fiduciary duties, and challenges that they may encounter in managing a trust by:
- Advising trustees on legal compliance matters and risk management
- Helping resolve disputes with beneficiaries and creditors to avoid costly litigation
- Assisting with trust accounting records and tax returns
- Guiding trustees in exercising their duties and authority to manage and distribute trust assets
Contact Our Trust Administration Lawyer
If you’ve recently been named a trustee, contact The Law Offices of Patricia Bloom-McDonald for the experienced guidance you deserve. We can help you understand your legal duties and how to fulfill them.
Located in Westport, The Law Offices of Patricia Bloom-McDonald proudly serves clients across Massachusetts, including all of Bristol and Norfolk Counties, Plymouth, and the southern coast. Specific areas of service include New Bedford, Fall River, Dartmouth, Acushnet, Taunton, Dighton, Berkley, Swansea, Somerset, Seekonk, Fairhaven, Marion, Raynham, Easton, Mansfield, Attleboro, North Attleborough, Rehoboth, Lakeville, Bridgewater, Rochester, Norton, Assonet, Stoughton, Canton, Sharon, West Bridgewater, Brockton, Whitman, Maynard, Quincy, and Cape Cod. If you cannot come to us, we will come to your home, office, or a convenient location of your choosing. The initial consultation is complimentary.