Did you just become the trustee of a loved one’s trust, or of a trust that holds your own inheritance? Let me give you a quick high-level overview of what to focus on, so you can build yourself a to do checklist.
First, get a hold of the trust agreement, the document. If the trust was set up under a Will, ask for a copy of that Will. Skim the trust and make sure that you are named as trustee. If you were named, understand that you are not only expected to administer the trust, but you are also subject to legal duties often referred to as “fiduciary duties” and the trust laws of the State in which you are administering the trust.
Second, identify the property in the trust. If someone else already served as trustee before you, request all records. If you are the first trustee, because this is a new trust, get a list of assets that were transferred to the trust. How can you recognize that property is in the trust? By how it is titled. The property should be owned by you, as trustee of the trust. This is true for financial accounts and real estate.
Third, read the trust and find the instructions for making distributions. There should be clear instructions regarding the distribution of income and the distribution of principal. I would advise you to engage an estate planning attorney, who can interpret the trust document for you and explain these important provisions, since you must follow them. You may also want to consider hiring an accountant who is familiar with income tax returns for trusts. If the trust holds any property out of state, or property you may not feel qualified to handle, such as firearms or specialized business interests, you should look if the trust allows you to name a co-trustee or to appoint a special trustee, who could help you.
Fourth, now that you have control over the trust property, you need to turn your attention to the beneficiaries of the trust. My best advice is to communicate often and effectively with them. Be consistent in your messages and keep good records of these communications, so nobody can come along later and claim you didn’t share some information with them. Use your people skills and get to know the beneficiaries and their needs. All beneficiaries are different. Be particularly considerate and careful with beneficiaries who may be vulnerable or very trusting of you. My advice: Clearly establish your role as trustee and tell the beneficiaries that you are not their legal adviser. Occasionally there are beneficiaries who don’t understand your role. They may think you are treating the trust property as yours and they will try to take it from you. Let them know you are managing the property according to the rules of the trust and your state’s laws.
If you are in need of support or guidance while you serve as trustee, an estate planning attorney can provide that. Any consultation fee will be less than the legal fees resulting from a dispute with a beneficiary, a tax authority, or a creditor. A visit with an estate planning attorney when you first become Trustee will put you on a good course.