How do you administer a trust?
Administering a trust involves several steps and responsibilities, which will depend on the terms of a trust. In general, the process involves:
Understanding the trust document: The trustee (person who is the manager of the trust) must thoroughly review the trust document to understand its provisions, instructions, and any specific conditions or requirements set forth by the grantor/trustor. This can be confusing and require an attorney.
Inventory and valuation: The trustee takes inventory of all the assets held within the trust, such as real estate, investments, bank accounts, or personal property. An accurate valuation of these assets is determined to establish the trust's overall value.
Asset management: The trustee is responsible for managing the assets in the trust prudently. This includes making investment decisions, monitoring performance, and ensuring that the assets are protected and preserved.
Debts payment: The trustee is also responsible for making sure that any debts are paid with the assets. (E.g. outstanding credit card bill, mortgage, etc.)
Record keeping: The trustee maintains detailed and accurate records of all trust transactions, including income, expenses, distributions, and any changes to the assets or beneficiaries.
Communication with beneficiaries: The trustee keeps beneficiaries informed about the trust's administration, providing regular updates, account statements, and addressing any questions or concerns they may have.
Tax and legal compliance: The trustee ensures that the trust complies with applicable tax laws by filing tax returns and paying any taxes owed. They also handle any legal requirements and fulfill obligations related to the trust's administration.
Distributions to beneficiaries: Based on the terms of the trust, the trustee makes distributions to beneficiaries as specified. This may include regular income distributions, discretionary distributions, or specific distributions for certain purposes or events.
Final distribution and termination: When the trust's purpose has been fulfilled, or upon the occurrence of specific events outlined in the trust document, the trustee oversees the final distribution of the remaining assets to the beneficiaries. This may involve closing accounts, transferring ownership, and formally terminating the trust.
Throughout the trust administration process, the trustee must act in the best interests of the beneficiaries, exercising their fiduciary duty with diligence, loyalty, and impartiality. Typically, a trustee is best served by working closely with an attorney. Contact me for a complimentary consultation.