Trust administration is a serious legal responsibility. If you are appointed trustee for a trust in Nevada, you may be in over your head, especially if you have no legal or financial background. Before assuming your role as trustee, talk to an attorney about trust administration.
General trust administration typically includes recordkeeping, documentation, and following the trust rules the grantor set. Trustees also must fulfill their fiduciary duty to the trust and beneficiaries. A breach of this duty could result in a lawsuit. If the trust’s assets are complex or you are unsure how to fulfill your duties, you should hire an attorney familiar with trusts to help you.
Ask our Henderson, NV attorneys for trustee representation for a free, private legal assessment when you call Flake & Flake at (702) 829-5731.
Avoiding Breaches of the Trustee’s Fiduciary Duties
A trustee owes a fiduciary duty to the trust’s beneficiaries to manage the trust in a way that benefits them. It is a duty to act in the best interests of another.
Key parts of your fiduciary duty may include, but are not limited to…
- Adhering to the rules set by the grantor
- Making distributions according to the rules
- Investing and growing the trust’s value
Breaching your fiduciary duty may be a serious violation, and beneficiaries may take legal action against you.
Possible Risks or Liabilities for a Trustee
While trustees are generally entitled to fair compensation for their efforts, they may not pay themselves from the trust. If a trustee pays themselves directly from a trust they manage, they may be accused of self-dealing, a major breach of fiduciary duty.
Even if you do not enrich yourself from the trust, there are other risks and potential liabilities. Incorrect distributions, missed tax filings, and poor accounting practices can lead to serious trouble. If you are worried about these risks or believe you have already made a serious mistake, contact a lawyer for help.
What if a Trustee Makes a Bad Investment Using Trust Assets?
While a bad investment can be a tough pill to swallow, it does not necessarily constitute a breach of the trustee’s fiduciary duties. Not every investment will pay off, and trustees should not be penalized for making good-faith investments that lose money.
However, if an investment was so bad that anyone else would have known not to proceed, beneficiaries might have a strong claim for breach of fiduciary duty. Review investment decisions with a lawyer, especially if the investment is highly risky.
How Can a Lawyer Help a Trustee Manage a Trust?
Your attorney can help you understand how to administer the trust, including record-keeping, documentation, and general housekeeping issues.
Your attorney can also help explain how to file taxes on behalf of the trust. Taxes are confusing at the best of times, and filing taxes for a trust may be very confusing if you have never done it before.
Certain trust documents, including the trust’s rules set by the grantor, may not be clear. Your attorney can help you review, interpret, and understand the laws and rules governing the trust so you are better prepared and less likely to make a mistake.
When Should a Trustee Make Distributions?
Trustees may make distributions in accordance with the trust’s rules. For example, many trusts require distributions at certain times, such as when a beneficiary reaches a certain age.
Beneficiaries normally cannot simply request that a trust distribute money unless the trust rules specifically give them that right. If they do not have that right, the trustee must avoid making such distributions, even if it would upset the beneficiaries.
When Can Someone Be Named as a Trustee to a Trust in Nevada?
A grantor may name a trustee as soon as the documents to create the trust are signed and finalized. The grantor does not have to pass away for someone to be appointed as a trustee. A trustee is not a personal representative or executor of the grantor’s estate.
A trustee may be named while the grantor is alive or upon their death. A trustee may step in if a grantor becomes incapacitated. Depending on the trust, the grantor may amend it at almost any time to appoint a new trustee.
How Should a Trustee Manage a Revocable Trust?
Revocable trusts, also called living trusts, are very flexible. The grantor is often still alive and may alter the trust’s terms at any time. They can change the beneficiaries, control the assets, and even name a new trustee if they wish.
When handling a revocable trust, trustees may need to contend with the grantor’s wishes and whims. However, they must also balance the grantor’s wishes with their fiduciary duty to the beneficiaries. If you ever feel that the grantor wants something that creates a conflict with the beneficiaries’ interests, speak to a lawyer before taking any action.
What is an Irrevocable Trust?
An irrevocable trust is one that, once created, cannot be undone, at least not by the grantor. The grantor places their assets in the trust, and once the trust is effective, the grantor relinquishes control to a trustee.
Assets may be invested or managed, and distribution may be made, according to rules that cannot be changed, even if the grantor has second thoughts.
This might make the trustee’s job easier, as they may not have to contend with the grantor’s desires and must manage the trust only in the beneficiaries’ best interests.
What if a Trustee is Sued in Nevada?
If a trustee is sued for mismanaging a trust, self-dealing, or any other breach of fiduciary duty that cost the trust money, the trustee may be sued. You may have to pay out of pocket for any lost value in the trust. Beneficiaries may sue to have you removed as trustee. Hire a lawyer as soon as possible.
What Evidence Does a Trustee Need in Case of a Legal Dispute?
Perhaps the most important evidence is documentation. Everything about the trust must be thoroughly documented. Gather records of assets and funds, investment records, distribution records, and details about anyone who has ever been involved in the trust immediately.
If you followed the rules, trust records should disprove any claims made by upset beneficiaries.
Does a Trustee Always Need a Lawyer?
Yes. Becoming a trustee is often a legal process in itself, and you may receive legal guidance before you begin your duties as trustee. It is a good idea to have a lawyer who can represent you in case of a legal dispute involving the trust. Your lawyer should represent you, not the trust or beneficiaries.
Can a Trustee Sue a Beneficiary?
Yes. If a beneficiary’s actions would harm the trust, the trustee may sue.
You may seek an injunction to prevent a beneficiary from continuing an action that would harm the trust. If the harm has already occurred, you might sue the beneficiary to reclaim any value lost as a direct result of their actions.
Contact Our Nevada Attorneys for Trustee Representation
Ask our Las Vegas, NV attorneys for estate planning for a free, private legal assessment when you call Flake & Flake at (702) 829-5731.
