Not all that long ago, trusts were used almost exclusively by the wealthy because loopholes in the law allowed a trust to be used to transfer wealth without paying taxes on that transfer. Although those loopholes have long since been closed, trusts are now more popular than ever and are routinely found in the estate plan of the average person. If you were recently notified that you are the Trustee of a trust created by a family member or friend, and you have never acted in the role of Trustee before, you probably do not know what is expected of you. The good news is that the Lincolnshire living trust attorneys from Hedeker Law, Ltd. can help you administer the trust.
What Is a Trust?
In short, a trust is a relationship whereby property is held by one party for the benefit of another. The person who establishes a trust and creates the trust terms is referred to as the “Settlor” or “Maker.” The party to whom the trust assets are entrusted is the Trustee of the trust. The Trustee is responsible for administering the trust and managing the trust assets. Every trust must also have at least one beneficiary who benefits from the trust assets. A trust may have more than one beneficiary, but must have at least one, and they may be current and future beneficiaries. The Settlor of a trust also creates the trust terms that guide the administration of the trust. Trust terms may be just about anything the Settlor wants, as long as they are not illegal or unconscionable. Finally, a trust requires funding. Almost any type of assets may be used to fund a trust, including cash and securities, real and personal property, or life insurance proceeds.
What Is Involved in Administering a Trust?
The individual appointed as the Trustee of a trust is the person responsible for administering the trust. The difficulty level involved in administering a trust will depend, to a great extent, on how complex the trust is and how valuable the trust assets are. Some trusts are small enough, and simple enough, that the Trustee is able to manage the trust assets and administer the trust without hiring an attorney; however, most Trustees find it advisable to retain the services of an experienced state planning attorney to help administer the trust. Common duties and responsibilities of a Trustee during the administration of a trust include:
- Having a thorough understanding of all trust terms and administering the trust according to those terms.
- Managing and investing the trust assets using the “Prudent Investor” standard.
- Distributing trust assets according to the terms of the trust.
- Keeping detailed records of all trust business
- Communicating with trust beneficiaries about trust business
- Mediating disputes among trust beneficiaries
- Preparing and filing tax returns for the trust
- Defending the trust against any challenges
As you can see, it helps to have a legal and/or financial background if you are the Trustee of a trust. As the Trustee, you are expected to understand all of the terms of the trust and have at least a basic understanding of any state and/or federal laws that apply to the trust. Without a legal background, this aspect of your Trustee duties and responsibilities will be more difficult. You are also responsible for investing the trust assets so that the trust is profitable; however, unless the Settlor specifically directed you to make risky investments, you must be very cautious and focus more on preserving the trust assets than on making a large profit.
If you are serving as a Trustee for the first time, all of the trust duties and responsibilities may seem overwhelming, which is precisely why many Trustees decide to hire an attorney to help them throughout their time as Trustee.
Contact Lincolnshire Living Trust Attorneys
For more information, please download out FREE estate planning worksheet. If you have additional questions or concerns regarding living trusts, contact the experienced Lincolnshire living trust attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.