Trustees are named for the reason that they won the trust of the grantor in the course of the course of. The grantor has their trustees listed as the guardians and decision makers of their trusts, either in the form of irrevocable or living. As trustees, you could possess the expertise and technical know-how to be able to fulfill this obligation or proven that you use good judgment when making decisions in your process. Being a trustee on your own is an honor and obligation.
As a trustee, however, as an individual trustee, you might discover yourself in unfamiliar terrain.
Corporate trustees have procedures, policies and a pay-for-performance system they employ to manage trusts. They’re professionals (it’s actually their task) They tend to be knowledgeable about the rules of the game. However the person who is designated as a trustee might be tempted to make sense of it on their own.
In any case in your new role as a trustee you’ll be thrown into an administrative learning curve. This may be a bit overwhelming, since there’s already your life both financial and otherwise to handle and now you’re being tasked with the duty of protecting and securing the trust’s financial structure, which is a separate entity called the trust.
In this post I’ll cover some of the basics to be aware of and what to expect when requested to accept your trusteeship.
FIRST, UNDERSTAND THE TRUST
Although the grantor may communicate the trust’s directives or intentions as well as assets, it’s advisable to obtain legal advice once you’re required to become trustee. It’s best if the lawyer who wrote the trust’s terms will be able to communicate with you regarding the responsibilities of a trustee. However, trustees may be pushed into this role without knowing what assets the trust has, or the trust’s instructions. In any event, seeking advice from a third party can be the opportunity to take a moment and look around to determine if you’re ready for the trustee’s role.
As trustees, you are held to an obligation to act as a fiduciary in safeguarding the interests of beneficiaries of the trust. It is your responsibility to supervise and protect the assets for the benefit of beneficiaries as per the trust’s rules and regulations. As trustee you don’t have the assets, and are required to keep them distinct from your private life. A lawyer can assist you learn about your obligations. Here are some things you can ask your lawyer:
Are I acting on my own as trustee or do I have to cooperate with any co-trustees?
Let me know more about allocations which are required and those that will be non-required.
What are their beneficiaries? And how do I reach them?
What state-specific conditions and rules should I adhere to for my trust and communicating with the beneficiaries?
How can I get paid for my work?
Who are the successor trustees in case I do not accept or are unable to continue serving as trustee?
You can choose to not serve as trustee. The lawyer can provide the timeline for when you have to make that decision. Once you’ve understood the terms for the trust you’ll get more knowledge of the duties you have as trustee.
It’s a distinct financial entity that is not connected to your private life. Keep in mind, however, that you’re still responsible to personal responsibility since the beneficiaries are able to take legal action if they think you’ve acted recklessly or improperly managed those trust’s resources.
When you have decided to accept the position of trustee seek the advice of an attorney and get the necessary documents to officially accept the trusteeship. Then, you can move forward by following your next step.
TAKE AN INVENTORY OF THE TRUST’S ASSETS
Find out what you’re accountable as trustee. Living trusts could already be able to hold assets in their trust’s names. This is referred to as a trust that is funded. Other trusts can be able to receive assets following an event such as the grantor’s incapacitated or death, at the time, the trust’s assets are transferred to the trust.
For instance, I have an estate trust in my will. The trust isn’t in existence up to the point that my wife or I die. Following our demise, via our will of pour-over the bulk of the assets we have will be redirected into the trust. The trustee will manage it to benefit our children.
For Trusts that are funded trusts, the trust will have legal title to assets. For instance, houses, bank accounts and brokerage accounts, vehicles and many more. As trustee, you are able to work with institutions relevant for access to information and assets through providing evidence of your authority as trustee.
Financial Tips: When handling the trust of someone who has passed away, get additional copies of the certificate for death. These can be helpful in the handling of financial institution’s documents.
In the case of trusts that are not funded in the event of the death of the grantor you’ll be working in tandem with the executor or personal representative of the estate of the grantor. Together, you’ll examine the assets that need to be transferred to the trust. You’ll also review which assets can’t transferable, as well as what assets can be transferred to the trust. Some assets may be listed by as beneficiaries of the trust such as savings accounts for retirement, accounts with financial value or insurance contracts. The distributions are simple and are governed by the beneficiary agreement. In other instances you’ll have to adhere to the trust’s rules and guidelines to know how to divide the trust’s assets.
At this point it is crucial to streamline your life and safeguard yourself legally by separating trust’s finances from your personal finances. Make separate brokerage, bank accounts as well as other financial accounts under the name of the trust to hold all trust assets. Keep meticulous financial records and try not to make significant financial transactions until you’ve a good knowledge of:
The trust’s assets.
The beneficiary designations for assets in the trust.
The beneficiary designations of assets transferred the trust. the trust.
The amount of assets worth on when the deceased passed away (for trustees who manage the trust following the death of the trustee).
The amount of income earned by the assets following when the death occurs (also for trustees who manage the trust following the death of a trustee).
NEXT STEPS AS A TRUSTEE
After you’ve got an understanding of the terms of trust including assets, terms, and the logistics, it’s time to inform the beneficiaries. As trustee, you are legally responsible to inform people who are beneficiaries to the trust and provide contact details. Every states has its own set of rules and you should check by consulting your legal advisor.
The beneficiaries of the trust are those who you are acting for as fiduciary. As a legal responsibility as an fiduciary, it’s important to communicate with them in a transparent manner. Do not play favorites if there are multiple beneficiaries and treat them all equally. Also, make sure you give reports and financial statements promptly and respond to their inquiries.
In this phase it is also advisable to work with a team of experts who can help you manage the trust so that you don’t waste all of your time and energy each year. There’s no need to be a single trustee, trying to work it all for yourself, and putting yourself in a position that you do not have experience. The trust’s rules will let you outsource professional services such as bookkeeping investments, investment management, the management of real estate assets along with tax planning. Your responsibility is to supervise these services for the beneficiaries.
As trustee, you do not have the funds to cover these expenses from your own account. You can make it clear that the trust fund pays the professional fees. But, it is important to monitor your financials and provide your due diligence to the professionals you select, and be sure to assess their efficiency and cost frequently.
DON’T FORGET
Other important things to consider in adjusting to your new job as a trustee
Keep trust assets and related matters distinct from your personal assets by making sure you make all payments from an account that is in the name of the trust.
Keep meticulous records of all funeral, medical, and other administrative costs.
Create a method to send financial reports and accounts to beneficiaries on a regular basis.
Estate taxes are only applicable to estates that are taxable for wealthy households. But, you must still to declare any earnings these assets earn within the trust. Also, you must declare income tax for the year during which the trust earns revenue.
OVERALL, GET THE GUIDANCE YOU NEED
The process of becoming a trustee for yourself can be lonely. Working with experts with experience in guiding individuals through similar situations will give you the chance to make more informed decisions. This also gives you to discuss these issues with others with whom you “get it.” There aren’t any “trustee support groups” that I’m aware of that connect trustees to talk about the pressures of their roles.
Alongside meeting certain demands for services and having the ability to vent your frustrations, you’ll be less liable as a trustee and protect your beneficiaries and yourself are serving by working with experts.
In this case, for example, by cooperating with a financial advisor to oversee the trust’s assets and liabilities, the financial planner will try to minimize tax burdens using specific investment strategies, and as well invest in prudent investments in accordance with the trust’s rules. Therefore, you will be able to steer clear of investing in risky investments, which could cause beneficiaries to develop arguments that you failed to manage those trust assets.
There’s a lengthy learning curve to become trustee. Financial Planning Fort Collins’ team Financial Planning Fort Collins has previous experience helping trustees get through the complexities of their new job. From tax preparation for income using form 1041 to consolidating your investments and reducing tax avoidance We can take some of the burden off your shoulders. Take a look at our offerings to discover how we can assist you through the procedure of becoming trustee.
