Thursday, January 09, 2014
Trust Administration: A Guide for Trustees
Trust administration is not a very easy task. Also, it can raise a number of questions such as (1) Who gets what asset?; (2) How do you reduce taxes?; (3) Who's in control when the trust is established?
It's very easy for some people to mismanage a trust, most especially when a trust does not elect a corporate trustee. Here are some guidelines on the proper administration of trust.
1. Record Keeping
In many places, trustees are required to give precise, regular accounting to the trust beneficiaries. In certain places, this includes both current and the remainder of beneficiaries. Remainder beneficiaries are individuals who will receive properties when the trust is dismissed. Keeping accurate and sufficient records means keeping full records of income, distributions, and assets. It's advised to establish a strong team of professionals with a money manager, tax accountant, and estate planning attorney.
2. Diversifying Assets
Trustees might not fight the temptation to sit on a big part of stock which has served the trust well for several years. But this is not a good idea. A trustee is given a statutory duty to comprehensively diversify investments. Investment management is the process which perhaps leads to the most litigation against the trustees.
3. Unbiased Distributions
Some trustees may give special treatment to certain beneficiaries in terms of asset distribution. But a trustee has a fiduciary duty to current and remainder beneficiaries. Many individual trustees do not perfectly realize that they have a duty to both the current and remainder beneficiaries, and at some time there is a conflict of interest. There ought to be consideration for current income needs, and for capital appreciation also.
If the trustee is a family member, it's easy to bring personal bias into the relationship. Once you have made a decision regarding asset distribution, put into writing the reasons for either denying or making the distribution. Include documents that will support your decision and show you have given due consideration to all circumstances and facts.
Although it may be an honor to be named as a trustee, he or she has to bear in mind that he's taking on a number of legal risks. A trustee could be held liable not only for losses in investing, but also for profit that could have gained from wiser investing. Often, trustees feel that their personal relationship with the family could keep them from legal claims. But in the long run, the exposure won't be to the individual who named you as the trustee; it will be to those named as beneficiaries. It's best to ask the experts about professional trust administration services Perth if you have questions on proper trust administration. Check out the company of Estate Administration Services to get more information regarding trust administration.
