Trust Administration Mistakes to Avoid
Many people choose to use a trust in lieu of, or in addition to, a Will within their estate plan to distribute assets. When a trust is used, the Settlor (creator) of the trust must appoint someone to be the Trustee of the trust. If you find yourself in the position of Trustee for the first time, you may feel a bit intimidated about the duties and responsibilities involved in administering a trust. The Coral Gables trust administration attorneys at Stivers Law discuss common trust administration mistakes in the hope of helping you to avoid making them.
Trustee Duties and Responsibilities
All too often, the creation of a trust appoints someone as the Trustee of a trust without knowing what the duties and responsibilities of a Trustee are. As a result, many spouses, parents, and adult children end up as Trustees without knowing anything about the job. While a Trustee is responsible for numerous tasks, the general job of a Trustee is to manage and protect the trust assets and to administer the trust according to the terms created by the Settlor.
Trust Administration Mistakes
Despite the best of intentions, it can be very easy to make costly mistakes during the administration of a trust, particularly if it is your first time serving as Trustee. Knowing what to watch out for may help you avoid making one of these mistakes. Toward that end, the following are some common trust administration mistakes you should try and avoid making:
- Trying to go it alone. Administering a trust often involves complex legal and financial concepts with which the average person is not familiar. For this reason alone, it is always wise to retain the services of an experienced trust administration attorney if you have been appointed the Trustee of a trust. Not only is it best for the beneficiaries of the trust, but it is also best for you as the Trustee because you could be held personally liable for mistakes you make if you forego the assistance of an attorney.
- Violating your fiduciary duty. This is a huge mistake and can lead to personal liability. As the Trustee of the trust, you have a fiduciary duty to the beneficiaries of the trust. In essence, this means that you must put their best interests first when making decisions related to the trust assets. Not only is it a violation of your duties as a Trustee to do otherwise, but a violation of your fiduciary duty can even lead to legal action against you that could lead to being held personally liable.
- Conflicts of interest. One reason it is often best to appoint a professional Trustee is that it dramatically reduces the possibility of a conflict of interest. If, however, the settlor of your trust did not go that route, it likely means that you are personally acquainted with the beneficiaries of the trust. Make sure you do not create a conflict of interest because of those relationships. Keep your job as a Trustee separate from your personal relationships with the beneficiaries.
- Failing to keep detailed records. A Trustee is required to keep very detailed and thorough records of all trust business. One common mistake is for a Trustee to not take this requirement seriously because the trust is rather informal. You never know, however, when a trust might be involved in litigation which is why it is so important to keep records.
- Failing to understand compensation. The Trustee of a trust often puts in a considerable amount of time working on trust duties. It only makes sense then that the Trustee is entitled to compensation for that time. Sometimes, however, a Trustee is reluctant to bring up the issue of compensation because he/she has a personal relationship with the Settlor and/or the beneficiaries of the trust. Failing to clarify the issue of compensation in the beginning though is likely to lead to a much bigger problem down the road.
Contact Coral Gables Trust Administration Attorneys
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about trust administration, contact the experienced Coral Gables trust administration attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.