If you are appointed trustee for a loved one’s money as they age, or as part of a will alternative for a parent or grandparent preparing their estate, you might not know what you need to do next. Being a trustee comes with complex responsibilities, and you should work with a lawyer to properly carry them out.
Our attorneys represent trustees and help them manage trusts and understand their obligations. This can give you the confidence to manage the trust the “right way,” but we can also help you with questions, complications, or challenges. If you want to try to dissolve the trust or dispose of the money and assets in the trust, we can also potentially work to challenge or end the trust, depending on how it was formed.
For help, call our lawyers for trustee representation at Flake & Flake at (702) 829-5731 today.
Trust Basics
When someone owns property, they have a bundle of rights, including
- Legal title to the money, assets, accounts, etc.
- Control of the assets
- The ability to invest or draw income from the property or money
- The ability to sell or dispose of the assets or property.
With a trust, these rights are split up:
- The “grantor” or “settlor” puts money in trust.
- The trust takes on legal title.
- The trustee controls investments and incomes.
- The beneficiaries draw incomes from the money/assets in trust.
As a trustee, your role is responsibly managing the funds or assets in trust, and paying incomes to the beneficiaries.
Examples of Trust Administration
Trust administration can be very simple or very complex, depending on what money/property is in trust and what its purpose is. Here are some common examples:
- You might be trustee for your parents’ assets, which they put in trust for you to control for them as they age and cannot manage their own finances.
- You might be set as trustee for a niece or nephew after your sibling dies, managing an account to pay for the child’s education, housing, and other needs.
- Your parent might have left you property (their house, their investment accounts) in trust to skip their will, allowing you immediate control over the assets to benefit yourself and other heirs.
What Do You Need to Know to Manage a Trust
To properly act as trustee, you need to understand a few things:
What is in the Trust?
This is called the “trust corpus.” It may include stock portfolios, bank accounts, homes, and other property in trust.
What is the Purpose of the Trust?
Trusts are usually created for a certain purpose. It may be because the beneficiary cannot manage assets on their own (because of old age, young age, or a disability), to avoid probate through a will, or to put limitations on how money is spent.
Who Are the Beneficiaries?
Knowing who the money is supposed to benefit is vital, because you must put their interests before your own and follow the trust’s instructions on paying them.
What Restrictions Are in Place?
Many trusts have limits on how much of the original principal can be spent down, limits on when to sell assets, or limits on how the income can be spent (e.g., only for a disabled loved one’s needs).
What is a Fiduciary Duty?
Trustees are required to uphold a fiduciary duty. This means they must put the beneficiaries’ interests above their own and make a good-faith effort to properly manage the trust.
This helps make sure the trustee follows the trust’s requirements and avoids mismanagement or self-dealing.
How Do I Deal with Taxes on a Trust as Trustee
Generally, this will be something for an accountant to deal with. Our lawyers can potentially help you understand some of the tax rules, but it is best to have an accountant review expenditures, incomes, and disbursements for tax implications.
How Trusts Work as Will Alternatives
A trust is often used to avoid probate – the legal process a will goes through. It is faster and can protect certain assets from public disclosure or creditors.
Grantor Creates the Trust
To start, the original owner puts money, property, etc., in trust. They name themselves as trustee and beneficiary, meaning they still control and benefit from the assets – but they create this legal entity of a “trust.”
You Are Named as Trustee After They Die
You are named the successor trustee, meaning you take over as trustee when they die. You may also be the beneficiary, potentially alongside your siblings, your other parent, or other heirs.
Carrying Out Any Obligations
There may be obligations on you after your loved one passes to pay debts, notify beneficiaries, and assemble the trust corpus. This is similar to what you would do as executor of an estate, but it is all governed under the trust documents and skips probate.
Dissolving the Trust
These trusts are often meant to be dissolved after everything is taken care of. Our attorneys for trustee representation can help you divide the trust, pay the beneficiaries, and dissolve the trust.
Or, if that is not the goal, we can help you manage it going forward.
Acting as Trustee for a Special Needs Trust
Special needs trusts are a popular way to pass money to a disabled child or loved one without hurting their eligibility for Social Security Disability and other programs. These can also be set up while the grantor is alive to help manage funds for the disabled loved one.
Grantor Creates Trust for a Disabled Person
The original grantor must create the trust for a disabled person under age 65. It is usually set up by a parent or guardian.
The trust may be funded as part of their will, instead of setting it up earlier.
Special Requirements Must Be Followed
Special needs trusts can only be used to support the beneficiary through certain types of payments. This often includes things like medical care and transportation.
Using it for other purposes (potentially including housing) might reduce your loved one’s SSI benefits or potentially disqualify them from benefits.
Ongoing Responsibilities Required
Special needs trusts are often set up to provide a loved one with support for the rest of their life. This might mean holding this responsibility for many years, or even passing it on to someone else if you become unable to carry out the requirements (e.g., passing responsibility to a younger sibling or cousin).
Can You End or Dissolve a Trust?
Sometimes. Some trusts are meant to be used temporarily then dissolved, while others are meant to be carried on.
Can You Name Someone Else as Trustee?
If you do not think you can perform the duties of trustee, it may be in your best interests to pass the responsibility to someone else. We can help you understand when this is possible and how to do it.
Can You Draw an Income from Administering a Trust?
Trusts often have a provision for the trustee to get some income for their duties as trustee, though the amount paid will vary based on what is in the trust and how much work you need to do as trustee.
Call Our Trustee Representation Lawyers in Nevada Today
Call Flake & Flake at (702) 829-5731 for a free case review with our attorneys for trust representation.
