Administering a trust for the first time can be overwhelming. You may be wondering where to start. Here are some tips for the first time trustee on how to begin administering a trust:1. Review all assets of the trust to become familiar with the trust property you are responsible for managing. Examine all trust documents,
the certification of trust, property deeds, bank and brokerage statements, other title documents, and personal property to gain an understanding of the type and amount of property contained in the trust. If any of the trust assets require active management, such as stocks, bonds or rental property, make a list of steps you need to take to properly manage such assets. See
trustee investment duties.
2. Review the trust documents, the testatorís will, and any other legal documents related to the trust to determine what type of trust you will be administering. Research the type of trust you are administering to become familiar with the objectives of the trust. See
Understanding Different Types of Trusts. You will find it easier to administer a trust after you learn a few things about the type of trust involved. For example, you should have a clear understanding of how long the trust is intended to last and the reasons the trustor used this type of trust.3. Review the trust documents for information about the beneficiaries of the trust. Determine how many beneficiaries there are, their relationship to the trustor, and where they live. Review the will for information about whether the trust beneficiaries received an inheritance under the will. Disputes with trust beneficiaries often result in costly legal problems for trustees. Understanding everything you can about the beneficiaries early on will help you avoid potential problems. Your attorney may recommend you have beneficiaries sign a Trust Beneficiary Release. Make sure you have up to date contact information for all beneficiaries of the trust.4. Review the trust documents to determine how your expenses will be reimbursed and whether you will be paid for your time administering the trust. Determine whether there is any cash available in the trust to pay your expenses. Make a note regarding whether any bank accounts need to be set up for administering the trust. See how to
open trust account.5. One of your most important duties as trustee is keeping accurate records of trust income, trust expenditures, and an inventory of trust assets. Decide what type of record keeping system you will use for administering the trust. See
trust accounting.6. If this is your first time administering a trust, you will probably need to hire several different professionals to assist you with the process. The degree to which you will need to rely on experts or trust companies will depend in part on the size and type of assets owned by the trust, as well as your own comfort level with the tasks involved. If you are interested in what it would cost to have the trust administered by a professional trustee, review our article on trust administration fees.You will also need a tax professional to assist in filing federal and state tax returns. For information on filing Schedule K-1 forms, go to
Schedule K-1 Trust Estate.To properly administer the trust, you may need a financial advisor to assist with managing trust investments. If the trust owns real estate, you may need a realtor. You may also be required to hire an appraiser to assist with valuation of trust property. Finally, to ensure you comply with all legal requirements and avoid liability, you will need to hire an attorney to consult when questions arise on how to administer the trust. To continue, go to Trust Administration Overview.
Trust Administration Guide
Welcome to the Pennyborn.com guide on how to administer a trust. Whether you are looking for a checklist of trustee duties, information on personal liability, the basics of estate administration, helpful forms for trustees or links to
trust law sources, our free Trust Administration Guide is a great way to get started, especially if this is your first time serving as trustee.For answers to common questions about serving as a trustee, go to
Dealing With Heirs
Along with all the other tasks involved in administering a trust, you may have to deal with the decedent's heirs. If the heirs of the grantor are not named beneficiaries of the trust but are expecting an inheritance, your job as trustee may become more difficult. The following is a list of tips to help ensure you do not make a mistake in your role as trustee:1. Never disclose information about the trust, trust assets, the beneficiaries of the trust or the terms of the trust unless you are sure it is proper to disclose it to the person requesting the information. As trustee, you should understand
Who Has Right to Information About Trust.2. Keeping detailed, accurate records about trust property and your actions as trustee is one of the best ways to avoid any problems in administering a trust.3. Comply with all required timeframes for administering the trust. If beneficiaries are expecting a communication or a distribution and do not receive it on time, it is likely to create problems.
If you need to send a distribution to beneficiaries, refer to our sample Trust Distribution Letter. Be prompt and timely in completing every required task of trust administration.4. Be polite and courteous to heirs and beneficiaries at all times. No dispute with a beneficiary is resolved with rude behavior. To read more, see
will and trust disputes.5. If you receive any communications threatening legal action regarding the trust or your actions as trustee, contact an attorney immediately. A licensed attorney familiar with applicable state law and the terms of the trust is in the best position to handle any further communications. If you are concerned about whether you may be removed from your role as trustee, see
Can Trustee Be Removed.
How to End a Trust
Depending on the duration of the trust and how long it takes to settle the decedent's estate, it will eventually be time to end the trust. As trustee, you cannot simply decide you are done and put your trust files away in a cabinet. There are several steps you must take to properly close the trust. For an overview of how to complete this part of the process, go to
How to End a Trust.A common question I receive from settlors and new trustees is regarding the difference between closing a trust and terminating a trust. This is an important distinction. In some instances, you may decide to terminate a trust before the trust has been administered or before it has fulfilled its intended purpose. To determine which process you need to complete, consult a lawyer about your reasons for wanting to close the trust.
Next Steps in Administering a Trust
The steps outlined above should prepare you to settle a trust. After completing the steps outlined above, you are ready to move on to the next steps in administering the trust. This will typically involve actions such as gathering trust assets, managing trust investments, paying taxes on trust property, preparing a trust accounting to beneficiaries, filing federal and state tax returns, changing title to trust assets, and making distributions to beneficiaries in accordance with the terms of the trust.
To see a list of duties you may be required to perform to administer an estate planning trust, review our free
As you go through this process, remember that every trust is unique. When reading about how to administer a trust, make sure the information applies to the type of trust you have. Also,
trust law varies from state to state. Confirm that you are handling your trust administration duties in accordance with the state laws that apply to your trust. An estate planning or probate attorney can answer questions on the specific type of trust and relevant state laws.
Trusts and Estate Administration
If you are also the executor of the decedentís estate, in addition to being successor trustee of the decedentís trust, our website provides many free guides and articles on estate administration and probate. For resources that will help you navigate the probate process, see our
free probate guide.For an overview of how to begin the process of administering an estate, see
estate administration.For a detailed list of steps executors need to complete in administering an estate, refer to our free
executor checklist.Copyright 2020 Pennyborn.com. ALL RIGHTS RESERVED.Updated February 26, 2020.
INFORMATION ON THIS SITE, INCLUDING ARTICLES, ESTATE PLANNING FORMS, AND THE ESTATE PLANNING BLOG, DOES NOT CONSTITUTE LEGAL, FINANCIAL OR TAX ADVICE. Pennyborn.com is not a law firm and is not a substitute for a lawyer. Your use of this site does not create an attorney-client relationship. Information on this site is for educational purposes only and may not be accurate, complete or up to date.