Trust Administration

Helping Trustees Navigate The Administration Process

Regardless of your purpose for creating a trust, that trust will need to be administered. Trust administration may involve accounting for financial assets, implementing charitable giving strategies, preparation of fiduciary income tax returns, succession planning, reporting to beneficiaries, and more. The trustee you select to manage your trust and its administration will be responsible for carrying out all of these duties in accordance with the terms of the trust.

Trusts can be utilized to help minimize estate taxes and to avoid costly probate. They can help you distribute assets to your heirs and also implement restrictions and conditions on when and how your assets will be distributed. The role of the trustee is extremely important, and careful consideration should be given when selecting the right person to serve as your trustee.

Trustees are personally responsible and often liable for their actions, or their failures to act as trustees. There are certain legal requirements that trustees must adhere to in administering the trust. Navigating your duties as trustee can be tricky and the responsibilities should not be taken lightly.

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What Is A Trust?

Trusts are fiduciary agreements between a trustee and the grantor, the person making the trust. The trust document gives the trustee the authority to manage the trust assets and distribute them to the named beneficiaries pursuant to the terms of the trust agreement. A trust may be used in place of a will, or may be used in conjunction with a will where it only applies to certain property.

Common goals of a trust: As people accumulate their wealth, grow their retirement accounts, make their investments and purchase assets, they are developing an estate that has value. A properly drafted trust document allow you to transfer those assets to a trust in order to accomplish many goals, such as protecting your assets and ensuring their distribution according to your wishes, protecting your estate from significant taxation and transfer fees, managing your affairs in the event of incapacity, and facilitating charitable giving.

Trusts can facilitate estate planning: The importance of trusts in estate planning is seen in their ability to minimize estate taxes and hopefully avoid probate. A trust is basically a fiduciary agreement, one based on trust and confidence, between the person making the trust (grantor) and the trustee. This agreement gives the trustee the authority to manage the assets of the trust and distribute those assets to the beneficiaries as specified in the trust agreement. There are several different types of trusts with their own objectives. Here is what you need to know.

Distributing assets according to your wishes: Trusts, like wills, are used to control your assets, including when and to whom your assets are distributed. A trust can also provide protection in situations where your beneficiary may not be as skilled at managing their own money. A trust agreement gives the trustee the authority to manage the assets of the trust and distribute those assets to the beneficiaries as specified in the trust agreement.

Revocable trusts and irrevocable trusts: Trusts are categorized as either revocable or irrevocable, which is an important distinction based on how the trust operates. A revocable trust, more commonly referred to as a living trust, provides the grantor with the ability to make changes to the terms of the trust, or revoke the trust altogether, at any time while they are still alive. A revocable trust is flexible because it can be modified to account for changes in your circumstances or intentions. With a revocable trust, the trustee does not take control until after your death or incapacity.

Irrevocable trusts, on the other hand cannot be altered by the grantor after they have been executed. This characteristic can be very helpful. Once an irrevocable trust has been created, the trust assets are in effect out of the reach of creditors and the probate court. They are not subject to estate taxes either. Although you relinquish control over your assets when they are placed in an irrevocable trust, you gain favorable tax consequences. After the grantor’s death, a revocable trust becomes irrevocable as they can no longer make changes to the trust document.

Other trust options: Depending on your unique circumstances, there may be other types of trusts which can be utilized in your estate plan. An Irrevocable Life Insurance Trust (ILIT) can be formed to hold one or more life insurance policies and are designed to remove the life insurance proceeds from your taxable estate. Qualified Terminable Interest Property (QTIP) trusts are most commonly used to provide income for a surviving spouse. Charitable Remainder Trusts (CRT) can generate a potential income stream for you, the donor to the CRT, or to other beneficiaries with the remainder of the donated assets going to your favorite charity or charities.

Our office has extensive experience administering trusts. We would be glad to work with you and your legal counsel to help you make sure you are protected as you carry out your trustee responsibilities. Howard, Howard and Hodges’s team is ready to guide you through the process. Contact us today.
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