June 2017

Tackling Trust Administration

If you are like many of our clients, you may find yourself named to serve as trustee of a trust after someone passes away. First-time trustees sometimes feel overwhelmed by their responsibilities and the sudden independence they may acquire in cases where they have just completed the court-supervised estate administration process. Here are four tips to help you complete your trustee duties effectively.

1. Partner with Advisors. Depending on the size of the trust and other factors, you will likely find it beneficial to obtain the advice of a tax accountant, financial advisor, and attorney. These key people can make your role much easier by explaining your options, duties and deadlines. Any professional fees incurred are most often authorized to be paid fully from the trust.

2. Management of Assets. Generally, the Trustee should invest trust assets as a "prudent investor" would. Depending upon the time horizon and other considerations, a Trustee may be called upon to grow, or simply maintain, trust assets. In all cases, Trustees should invest trust assets in a prudent manner and minimize or avoid inappropriate risk where possible. Retaining the services of an experienced financial advisor can help ensure you are complying with your duties.

3. Record Keeping. You must organize and keep track of the trust assets by compiling "adequate records" as required by North Carolina law. This includes assets which initially fund the trust as well as income due to the trust, payments of administration expenses of the trust, and distributions to beneficiaries. Spreadsheets can aid this process and are also useful when coordinating with other advisors on matters such as tax return preparation.

4. Communication. Most trusts will require that you notify all current beneficiaries of their right to receive property under the trust and also provide them a copy of the trust. Throughout your time as trustee, you may have a duty to provide beneficiaries with reasonably complete and accurate information as to the nature and amount of trust property. Regular and clear communication to the beneficiaries can reduce the possibility of later controversies.