To understand trust administration and truly protect and preserve wealth and assets for generations, it first requires you have a basic understanding of trusts.
What are trusts?
By way of background, a trust is a separate legal entity that owns and manages property like real estate, cash, stocks, bonds, etc. for the benefit of your desired beneficiaries. A trustee is appointed to manage the trust pursuant to the document’s precise instructions in the trust agreement. Trustees are fiduciaries who are held to a higher standard of care, so they must adhere to the trust’s instructions at the risk of being held personally liable for damages relating therefrom.
Ready to discuss
Trusts can provide enormous flexibility with respect to the management of trust property for the creator and the creator’s beneficiaries, including who receives it, when they receive it, how they receive it, and under what conditions they receive it, all of which can happen both during the creator’s life and continue long after death. Importantly, trusts have advantages and disadvantages that should be understood before utilizing them. Familiarize yourself with trusts by reading this post here:
What’s trust administration?
Trust administration is the process by which the assets in a trust are managed, invested and distributed to beneficiaries in accordance with its terms and conditions. Said differently, trust administration is the process of implementing the wishes of the creator of the trust both during life and after death in order to ensure those wishes are honored and carried out. It translates to less court, costs and conflict for your family, and in turn less emotional grief and disruption to their lives as they move on. Here’s a quick refresher on the main parts of trust administration, such as accounting, distributions, investments, compensation and taxation.
As mentioned above, trusts are very flexible, so their terms can and often do vary greatly from one trust to another. That may entail distributing the assets to the beneficiaries and ending on a date certain (like when a beneficiary reaches a certain age) or it may require keeping the trust in existence for generations. Trusts may give specific directions to the trustee or give the trustee broad discretion to make decisions. In either case, they require trustees to honor the terms of the trusts while balancing and engaging with beneficiaries with different and often difficult personalities, which is often challenging. Regardless, trust administrations require proper guidance to run efficiently, effectively and economically.
The best trust administration achieves the creator’s tax, logistical and familial goals, with the trustee performing its fiduciary obligations and maintaining a healthy relationship with the beneficiaries. It is advisable to work with qualified legal counsel, CPAs and financial advisors in order to ensure that the trust administration is done as seamlessly and smoothly as possible with minimal court, costs and conflict, especially litigation. That way you know you can sit back and relax knowing your affairs will be carried out long after you’ve passed and you’ve left a legacy to be proud of and modeled after.
We’d love to help you ensure your estate planning and trust administration is in good order. Contact us to get started today.