If your deceased loved one had a Revocable Trust, the family will go through a process called Trust Administration. Trust administration is the process of managing and distributing trust property to the beneficiaries of the trust upon the settlor’s death.
If you are the successor trustee of this trust, you will need to retain legal counsel to guide you through the trust administration process and protect you from potential personal liability.
The Daves Law Firm helps trustees in Austin, Texas and the surrounding areas administer trusts effectively and efficiently.
If you need assistance with trust administration, contact the Daves Law Firm today.
If you are the successor trustee of a trust, your job during the trust administration will include:
The terms of the trust, as set out in the trust instrument, will generally govern what you are supposed to do as trustee. Most trust instruments drafted by professionals are well-written. You might, however, have an out-of-date or poorly drafted trust instrument—it might contain conflicting or vague provisions, or its provisions might be torturously complex. If the trust instrument is silent or unclear on some item, you will need to retain legal counsel to get an answer—doing so is for the protection of you and the beneficiary of the trust. In some rare circumstances, it may even be necessary to petition the court for a ruling to provide further guidance.
As a trustee, you are bound by certain fiduciary duties. Fiduciary duties are the highest duties known to the law. There are many fiduciary duties owed by a trustee, but they fall within four principal categories:
(1) Duty of Loyalty. One of the most fundamental duties of a trustee is the duty of loyalty to the beneficiaries of the trust. In dealing with the trust fund, the trustee's own personal interests and opportunities for gain must be cast aside. During trust administration, a trustee is prohibited from placing himself or herself in any position where his or her self-interest will or may conflict with his or her obligations as trustee.
(2) Duty of Competence. The trustee must use such skill and prudence as an ordinarily capable and careful person would employ in similar circumstances. A trustee can exercise his or her fiduciary duty in such a negligent manner that the lack of diligence will result in a breach of that duty. The duty of competence is comprised of many sub-duties, such as the duties to keep and render accounts, take control of and retain trust property, enforce claims, and the duty not to co-mingle.
(3) Duty to reasonably exercise discretion. As a trustee, your job will involve making discretionary decisions—such as decisions regarding investments, distributions to beneficiaries, and expenditures. When you exercise discretion, you have a duty to do so ‘reasonably’ and in the best interests of the beneficiaries.
(4) Duty of disclosure. A fiduciary has an affirmative duty to make a full and accurate disclosure of all material facts and keep beneficiaries reasonably informed.
A trustee is under a duty to the trust beneficiaries to keep an accurate account of transactions relating to trust property. Accountings for trusts that have only a few assets and distributions can be fairly straightforward, but they should be prepared and given to beneficiaries on a yearly basis. If the trust’s transactions are few, a simple typewritten summary will usually suffice.
Provisions of the trust instrument may modify or eliminate one or more of your fiduciary duties as trustee. For example, The Uniform Prudent Investors Act, adopted by Texas, imposes a duty on trustees to diversify trust investments. However, many trusts contain language allowing the trustee to retain and hold property that the settlor put in the trust without a duty to diversify.
If you are administering a trust, make sure you get appropriate guidance from professionals. A trustee is permitted to seek the assistance of professionals such as accountants, bookkeepers and attorneys. Given the personal exposure a trustee undertakes when accepting the job of trust administration, smart trustees consult with experienced trust planning and administration attorneys to guide them through the trust administration process.
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