TRUST MANAGEMENT: FIVE THINGS YOU NEED TO KNOW IF YOU’RE A TRUSTEE
Trust management can be a tricky and complicated matter for a trustee. After all, a trustee only usually begins the process of trust management after the trustor, or the person who created the trust has passed away.
This article discuss five (5) things a trustee needs to know if they are managing a trust.
- BEFORE YOU DO ANYTHING, READ THE TRUST DOCUMENT.
I know what you’re thinking: reading the trust document is of course the first step of trust management for a trustee. However, very few trustees actually read and understand what their duties and powers are as conferred by the trust itself. Not reading the trust document is actually an example of nonfeasance with respect to trust administration. Chances are you are being paid to serve as trustee, so earn your money and also, protect yourself. As an trust management attorney O’Fallon, Missouri will tell you, mismanaging a trust can lead to personal liability. So read up, take notes and consult with a trust management lawyer (most trusts contain a provision which explicitly states that a trustee may use trust funds to consult with an estate lawyer, accountant or financial advisor.
2. YOU MUST PROTECT TRUST PROPERTY
A few years ago, a client of mine passed away and he had asked me to serve as trustee upon his death. The problem was that I didn’t find out he died until a month or so had already passed. As it turns out, someone was using the house off and on following his death. After learning he died, I immediately took steps to secure the house, including having the locks drilled. I called ahead with law enforcement to let them know when I would be over so no one would think we were robbing the property. Once I had access to the property, I was able to make a rough inventory of his personal property and with access then to his mail, confirm the accounts, investments and life insurance he had. The protection of trust property is an important first step for trustees.
3. MAKE CONTACT WITH BENEFICIARIES
Of course, a central function of trust management by a trustee is to make contact with the beneficiaries listed in the trust document. Again, consult a trust administration lawyer if you’re not clear as to assets are to be distributed. In most cases, you will see the names of beneficiaries listed in the document. As a trustee, I have found that the best practice is to contact beneficiaries only once you have secured all property, know what property is included in the trust estate, have the contact information for all beneficiaries and have a rough idea of what needs to be done and a rough timeframe to complete administration of the trust. Setting expectations and rough timeframes is extremely important to stave off unruly behavior by beneficiaries, who often think administering the trust consists of just cutting them a check in the first week. It doesn’t work that way.
4. AVOID A READING OF THE TRUST
Countless times over the years, I’ve watched TV and witnessed a show where a character is reading a will or trust to beneficiaries. This is not recommended and in practice, rarely done. The reasons are simple. First, it’s not necessary. You are required under Missouri law to send a copy of the trust to a beneficiary…and they can read it themselves and contact you with any questions. About ten years ago, my family lost a distant uncle. We only found about it because my mother and her siblings were listed as beneficiaries in the trust. I was asked to go to decipher whatever the trustee stated during the meeting. We arrived in his rural and disorganized real estate office (he was a realtor), he read the trust and all it did was spark a bunch of questions that he was not prepared to answer. That left everyone suspicious and ended up creating a lingering suspicion that the trustee was not on the up and up. A letter out first by the trustee would have set expectations and the reading was not necessary whatsoever. I promise you, it’s not a good idea.
5. CONSIDER AN EARLY PARTIAL DISTRIBUTION IF POSSIBLE AND COVER YOUR BUTT (CYA!)
Unless the trust terms don’t allow for an early partial distribution to a trust beneficiary, a trustee should consider one if possible. When a person has passed away with a trust that holds significant assets, I am a big believer in getting trust funds into the hands of beneficiaries, at least partially, as soon as possible. This does a few things. First, it puts cash in the hands of beneficiaries who presumably need that cash. Second, it shows that progress is being made on the trust administration and can keep beneficiaries from making life difficult for the trustee. To be clear, this is not a good idea unless the trust allows it, there are ample funds available and you know that there are minimal debts to be paid by the trust.
Regardless of whether you are doing several partial distributions or one lump sum distribution to beneficiaries, it’s vital that you cover your butt (“CYA”) with a trust settlement document. In that document, the beneficiaries acknowledge receipt of their share of the trust estate, waive all legal claims against the trust and the trustee and agrees that they are not entitled to any further funds. This effectively cements the administration legally, which should always be done anyway and in the process protects the trustee from liability down the road.
Legacy Law Center in St. Charles, Missouri is a highly rated probate and trust administration law firm. We help clients with administering complex estates and trusts. Call us today at (636) 486-2669 for a FREE CONSULTATION.
