Steps every Trustee should take.
Revocable Trusts: Their Rise in Popularity and What to Do If You’re Named as a Trustee
Revocable trusts are a popular estate planning tool. Unlike a traditional will, a revocable trust allows assets to pass outside of probate, providing privacy, efficiency, and control over asset distribution. While these trusts offer many benefits, serving as a trustee comes with serious responsibilities. If you have been named as a trustee, here are the steps you need to take to fulfill your legal duties properly.
Why Did Revocable Trusts Become Popular?
Avoiding Probate – By transferring assets into a revocable trust, families could bypass the time-consuming and often costly probate process.
Privacy – Unlike wills, which become public record in probate court, revocable trusts keep asset distributions private.
Flexibility – The grantor (person who created the trust) can modify or revoke the trust during their lifetime, making it an adaptable estate planning tool.
Incapacity Planning – If the grantor becomes incapacitated, a successor trustee can step in to manage trust assets without court intervention.
While revocable trusts remain a valuable tool, many individuals are now stepping into trustee roles and realizing the complexities of trust administration. If you’ve been named as a trustee, here’s what you need to know.
Steps to Take If You’re Named as a Trustee
1. Consult an Attorney to Avoid Legal Pitfalls
Being a trustee is a legal responsibility that comes with many requirements. A trustee who fails to follow state laws or the terms of the trust can face lawsuits from beneficiaries or other interested parties. Consulting an attorney can help you:
Understand your fiduciary duties under the law.
Ensure that all legal requirements, including proper notifications and filings, are met.
Avoid personal liability by following the trust’s terms and fulfilling your obligations correctly.
Handle disputes effectively and prevent litigation.
Trustees should never assume they can navigate these responsibilities alone. Seeking legal advice early can prevent costly mistakes and ensure a smooth administration process.
2. Review the Trust Document
Before taking any action, carefully review the trust document to understand:
Your powers and limitations as trustee.
The beneficiaries of the trust.
The specific instructions for managing and distributing trust assets.
3. Gather and Protect Trust Assets
You must identify, inventory, and secure all assets owned by the trust. This may include:
Real estate.
Bank accounts.
Investment portfolios.
Personal property.
Open a separate trust account if one does not already exist to ensure all transactions remain properly documented.
4. Notify Beneficiaries and Relevant Parties
Trustees have a duty to keep beneficiaries informed. As part of your role, you should:
Send formal notice to all beneficiaries about their interests in the trust.
Provide periodic accountings, as required by law or the trust document.
Respond to reasonable beneficiary inquiries in a timely manner.
5. Manage Trust Assets Responsibly
As a fiduciary, you must act in the best interests of the beneficiaries and:
Invest prudently to preserve trust assets.
Pay any valid debts and expenses of the trust.
Distribute assets according to the trust terms.
6. Maintain Accurate Records
Trustees must keep meticulous financial records of all transactions, including:
Receipts and disbursements.
Tax filings and payments.
Investment decisions and justifications.
Failure to maintain accurate records can lead to legal disputes or personal liability.
Conclusion
While revocable trusts gained popularity as a way to streamline estate administration, serving as a trustee carries significant legal and financial responsibilities. By following the correct steps and seeking professional advice when needed, you can fulfill your duties effectively and avoid common pitfalls.
📞 Have questions about trust administration? Contact The Probate Law Center at (816) 673-3223 or visit www.ksmoprobate.com for expert guidance.
Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. Every trust administration case is unique, and you should consult with a qualified attorney for guidance specific to your situation.