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Historically, trusts were used by wealthy families to pass down the family fortune from one generation to the next. Today, trusts are often found in the average estate plan, due in large part to their flexible nature and the fact that numerous estate planning goals can be furthered using a trust. When creating a trust, the Grantor (trust creator) appoints a Trustee. Once the trust is established, the Trustee is responsible for administering the trust. To help you better understand what to expect if you have been appointed as the Trustee of a trust, the attorneys at Wilcox Attorneys, PA explain trust administration.
What Is Trust Administration?
A trust is a legal arrangement that allows one party (referred to as the “Grantor,” “Settlor,” or “Trustor”) to transfer assets to another party (the “Trustee”) to manage for the benefit of a third-party (the “Beneficiary”). A trust agreement is the legal document used to create a trust. Within the trust agreement, the Grantor must appoint the Trustee and create trust terms that guide the Trustee during the administration of the trust. Among other things, the trust terms dictate when trust assets are to be distributed and who the beneficiaries are that receive those distributions. The trust terms should also make it clear what the purpose of the trust is and may provide guidelines for the Trustee to use when investing trust assets.
What Does a Trustee Do During Trust Administration?
One of the most important decisions a Grantor makes when creating a trust is the appointment of the Trustee. The Trustee can be an individual or entity (such as a bank, law firm, or trust company). The Grantor can also appoint two or more Trustees as Co-Trustees.
The overall job of a Trustee during trust administration is to manage and protect the trust assets using the terms outlined in the trust by the Grantor. Because a Trustee is a fiduciary role, a Trustee must use the utmost care when investing or managing trust assets and make all trust administration decisions with the beneficiaries’ best interests in mind. Some specific duties and responsibilities of a Trustee during trust administration include:
- Communicating with trust beneficiaries.
- Managing trust assets.
- Investing trust assets (always protecting the trust principal).
- Defending the trust if it becomes involved in litigation.
- Distributing trust assets.
- Calculating and paying taxes owed by the trust.
Do I Need an Attorney to Help Me Administer a Trust?
The law does not require a Trustee to work with an experienced attorney while administering a trust; however, there are several important reasons to consider doing so if you find yourself appointed as the Trustee of a trust.
One reason to work with an experienced trust administration attorney is to ensure that you understand all relevant state and federal laws and regulations as well as understanding the terms of the trust agreement itself. Failing to understand the applicable laws can result in trust litigation while your failure to clearly understand the trust terms can cause the trust itself to fail. As the Trustee, you could face personal liability for errors or mistakes made during the administration of a trust. Having an experienced trust administration attorney on your side is the best way to avoid legal entanglements or trust failures.
Can We Help You Administer a NW Arkansas Trust?
If you have been appointed as the Trustee and are faced with the daunting prospect of administering a trust in Arkansas, we can help. Contact the experienced attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today. Our estate planning office is located in Fayetteville, Arkansas and our caring staff is standing by to help you plan for your legacy and protect your future.