3 Problems when Administering a Trust

Many people make a trust an integral part of their estate plan. Trusts can offer many advantages, including the ability to pass assets outside probate. However, someone needs to administer the trust. Many people serve as the initial trustee, but after their deaths someone must take over, often a family member or a close friend.

Because trust administration is complicated, many trustees soon run into legal issues and need help. At Millhorn Elder Law Planning Group, we can advise trustees about their duties so that they don’t break the law.

Problem #1: You Don’t Understand Your Duties

To administer a trust properly, you need to understand the trust document inside and out. Many trustees overlook this critical step, and many things go wrong later down the road that could have been avoided.

Some trusts give the trustee latitude to manage the trust assets and make distributions. However, some trusts include very detailed instructions for what you can and cannot do. If you do not understand these rules, it is very easy to make mistake.

To help yourself, you should meet with an attorney to go over the trust. This attorney can be a helpful sounding board whenever an issue arises and you have a question.

Problem #2: You Don’t Understand How to be a Fiduciary

Trustees owe the trust beneficiaries several fiduciary duties. These duties are created by the law, not by the trust itself. Among your duties are:

• Duty to administer the trust in good faith. (Fla. Stat. 736.0801)
• Duty of loyalty. You must administer the estate solely for the beneficiary’s interest, not your own interest or someone else’s. (Fla. Stat. 736.0802)
• Duty to be impartial. If there is more than one beneficiary, you cannot favor one. (Fla. Stat. 736.0803)
• Duty to be prudent, using reasonable care, skill, and caution. (Fla. Stat. 736.0806)
• Duty to keep beneficiaries reasonably informed about trust assets and to account for all assets, expenses, income, and gains.

Many novice trustees can run afoul of these duties and other duties, which opens them up to legal liability when the beneficiary sues them for damages.

Problem #3: You Have No Experience Managing Assets

Trusts can contain many kinds of assets—real estate, stock, bonds, cash, etc. With some trusts, the trustee’s sole duty will be to distribute the assets to beneficiaries after the death of the person who created the trust (the settlor). Once all assets are distributed, your work is done.

However, other trusts will require that the trustee prudently manage and invest the trust assets for years or longer. Trustees naturally have many questions, such as:

• How do you sell stock and buy safer investment instruments like bonds instead?
• Should you sell stock and when?
• Should you buy insurance for real estate and personal property to protect against loss? How do you go about buying it?

Fortunately, trustees can hire investment advisors for help and charge the fees to the trust. But doing so might invite a dispute with one of the beneficiaries, who thinks you are wasting trust assets. You should always think about the legal implications of your actions as a trustee.

Have Questions as a Trustee? Call Us Today

Serving as a trustee is a heavy responsibility, and you need experienced legal counsel by your side. At Millhorn Elder Law Planning Group, our trust administration attorneys at The Villages can help answer any questions that you have.

To speak with an attorney, please call 800-743-9732 or send us an online message.

Resource:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0736/Sections/0736.0801.html