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 testator’s 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.GOT QUESTIONS… JUST CLICK HERE!
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.