Creating a comprehensive estate plan may involve the use of a wide variety of estate planning tools and strategies. One of the most popular of those tools is a trust. Creating a trust can help achieve numerous goals, including incapacity planning, asset protection, and protecting a minor’s inheritance. Although trusts can differ in many ways, one common denominator is the need to appoint a Trustee to oversee the administration of the trust. If you were recently informed that you are the Trustee of a trust, you may be feeling a bit intimidated by your new position if you are a first-time Trustee. Fortunately, an Illinois trust attorney can help you with trust administration to ensure that you don’t make any costly mistakes.
Trust Basics
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also called a Maker or a Grantor, who transfers property to a Trustee. The Trustee holds that property for the trust beneficiaries. The beneficiary of a trust can be an individual, an entity (such as a charity or political organization), or even the family pet. A trust must have at least one beneficiary but may have an unlimited number of beneficiaries. A trust may have both current and future beneficiaries.
All trusts are broadly divided into two categories – testamentary and living (inter vivos) trusts. Testamentary trusts do not become active during the lifetime of the Settlor. Instead, a testamentary trust is typically activated by a provision in the Settlor’s Last Will and Testament. A living trust, on the other hand, activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts. As the name implies, an irrevocable trust cannot be changed, modified, or terminated by the Settlor once it activates. If the trust is a revocable living trust, however, the Settlor may modify or terminate the trust at any time.
What Are Your Duties and Responsibilities as Trustee?
In general, the Trustee’s job is to oversee the administration of the trust and manage the trust assets. That explanation, however, is an over-simplification of the duties and responsibilities of a Trustee. In practice, a Trustee plays a number of diverse roles during the administration of a trust. Just a few of the duties and responsibilities you will have as a Trustee include:
- Managing and protecting trust assets
- Abiding by the trust terms unless they are impossible, illegal, or unconscionable
- Investing trust funds using the “Prudent Investor Standard”
- Monitoring trust investments
- Communicating with trust beneficiaries
- Resolving conflicts among beneficiaries
- Making discretionary decisions
- Distributing trust funds to beneficiaries
- Approving or denying distributions if given discretionary authority
- Keeping trust records
- Preparing and paying trust taxes
How Can a Trust Attorney Help?
One of the most common mistakes Settlors make when creating a trust is naming someone as Trustee because they “trust” that person instead of stopping to think if the individual has the experience and/or skills necessary to administer the trust. If you find yourself named as a Trustee, and you are unsure about your ability to successfully administer the trust, failing to ask for help when you need it is a huge mistake that could even lead to personal liability for errors you might make as a result. An Illinois trust attorney can provide you with advice and guidance in your role as Trustee to ensure that don’t make any costly mistakes. Your abilities and experience, the complexity of the trust agreement, and the size of the trust assets will all help determine how much help you need in your role as Trustee; however, it is definitely in your best interest, and the best interest of the trust beneficiaries, for you to consult with an experienced trust attorney as soon as possible.
Contact an Illinois Trust Attorney
For more information, please download out FREE estate planning worksheet. If you have additional questions or concerns regarding your role as Trustee, or trust administration in general, contact an experienced Illinois trust attorney at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.
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