If you recently learned that you were appointed to be the Trustee of a trust, and this is the first time you have served in such a capacity, you might be somewhat intimidated at the prospect. The best way to ensure that you do not make a costly mistake in your role as Trustee is to retain the services of an experienced trust administration attorney. You may also find the following trust administration tips to be helpful from a trust administration attorney at Parman & Easterday.
What Is a Trust?
You probably have some idea what a trust is and how one operates already; however, since you will be administering one it cannot hurt to learn the basics. A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor (also referred to as a Maker, Trustor, or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries.
Tips for Administering a Trust
If you find yourself as the Trustee of a trust for the first time, the responsibilities you have likely feel a bit daunting. The following tips may help you with your trust administration duties:
- Don’t try to go it alone. The duties and responsibilities of a Trustee during the administration of a trust typically require at least a rudimentary knowledge of both legal and financial concepts. Unless you happen to be an estate planning attorney or financial advisor yourself, do not try to administer the trust without seeking professional guidance.
- Make sure you have a very clear understanding of the trust terms. The trust terms, created by the Settlor, guide the administration of the trust. Read, and re-read, the trust agreement until those terms are clear to you. Also, make sure that you are clear on the overall trust purpose. If you have any doubts, consult an experienced trust attorney for advice and guidance.
- Invest cautiously. As a Trustee you may be required to use the “prudent investor standard” anytime you invest trust assets. This requires you to invest with caution, avoiding risk at all times and always focusing on protecting the principal first and growth second. Be more careful with trust assets than you would be with your own assets.
- Document everything. One of your duties as Trustee is to keep excellent records of all trust business. Another is to maintain communication with the beneficiaries of the trust and keep them up to date on trust business. You cannot document too much; however, you can find yourself in a position where you wish you would have documented more.
- Be vigilant about avoiding conflicts of interest. If the Settlor appointed you as the Trustee, and you are not a professional, the odds are good that you have/had a personal relationship with the Settlor. That means you may also have a close relationship to one or more of the beneficiaries of the trust. If so, it could be easy for the appearance of a conflict of interest to arise that could threaten the success of the trust. Always be aware of that possibility and do everything possible to avoid it from occurring. If you reach the conclusion that you cannot avoid a conflict of interest, it may be time for you to resign your position and allow the successor Trustee to take over.
Contact a Parman & Easterday Trust Administration Attorney
For additional information, please join us for an upcoming FREE seminar. If you have questions or concerns about trust administration, contact an experienced Oklahoma City trust administration attorney at Parman & Easterday by calling 405-843-6100 to schedule your appointment today.
Yes. In a worst-case scenario, you could even be held personally liable for mistakes or errors you make as the Trustee, particularly if you failed to seek guidance from a professional before making important decisions involving the trust assets.
Yes. Just because you were appointed to be the Trustee of a trust does not mean you are obligated to serve in that position. You can reject the appointment.
If you are not sure what a trust term means, check with an experienced trust administration attorney right away. If your attorney also feels that the term is ambiguous, you may need to ask a court to interpret the term.
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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