Trusts are at the heart of nearly every modern estate plan because they can help their creator avoid probate, preserve wealth, and have a bit more control over what happens to an estate after death. The most challenging aspect of estate planning using trusts is finding a trustee that can manage the workload required to make a trust work well.
Being a trustee is not an easy job, but it is something a lot of people are willing to take on because they want to do whatever the person asking them to do wants. Below are 5 tips for trustees that want to make sure they are trust-worthy.
Before you agree to be a trustee, or before you get to work if you have already said yes, take time to read over the documents establishing the trust you are being asked to administer.
Does it ask you to do anything you are uncomfortable with morally?
Does it ask you to do things you don’t know how to do? If so, does it allow you to hire someone to help you figure out how to do those things?
It is okay to turn down the opportunity to be a trustee if you don’t think you are up to the task.
Trustees can be held personally liable if they mess up. In order to prevent any messes, and to provide cover if something beyond your control happens, it is necessary to keep detailed records of your work as trustee.
This involves more than keeping good financial records. You must keep records documenting any actions you took or decisions you made. You should also document each time you contact a beneficiary about trust business or vice versa.
Beneficiaries, aka the people or organizations a trust is created to benefit, have a legal right to know what is going on with the trust. They should be notified when any significant action is taken, and they must get all the information they need for tax purposes from you. It is also nice to just reach out to beneficiaries with periodic updates.
In order to make recordkeeping and communication easier, it is a good idea to put processes in place that you can follow each time you have a task to do. You could, for example, lay out ground rules that beneficiaries need to follow in order to make a request of you.
Unless you are a lawyer, an accountant, and a financial guru, there are going to be things you are responsible for as a trustee that you simply do not know how to do. When you don’t know how to proceed, don’t guess! Don’t hesitate to get help from a professional when you need to.