Ethan had signed the paperwork to establish his dynasty trust. He transferred ownership of assets and cash to fund the trust. He understood that his trustee would take over now and handle the trust administration. However, Ethan didn’t really know what trust administration involved.
Trusts Are . . .
All trusts consist of the following:
- A purpose, such as avoiding probate, lowering taxes, or supporting a loved one with special needs;
- The grantor or settlor, who signs the trust document establishing the trust;
- The trustee, a person or institution that manages the trust assets and makes distributions to beneficiaries;
- At least one beneficiary who receives those distributions; and
- The trust assets, which consist of property the grantor transferred to the trust to ‘fund’ it.
Once the trust is set up, the trustee can begin managing the trust.
Trust Administration Is . . .
Primarily, the trustee is a fiduciary who owes a duty of care to the trust beneficiaries. This often entails duties including the following:
- Gather all trust assets. The trustee may confirm that the grantor has transferred assets to the trust.
- Managing investments of the trust funds. Rather than letting trust funds lie dormant, the trustee may invest the funds to generate income.
- Produce financial statements to beneficiaries. They may need these to file their personal income tax returns.
- File annual income tax returns. Trusts may be required to pay tax on income earned during the year.
- Making distributions. This may not be as straightforward as it sounds. For example, the terms of a discretionary trust may give the trustee greater power and flexibility in making distributions to beneficiaries.
- Altering or terminating the trust. Whether the trustee can take this kind of action depends on the type of trust. Sometimes, a trustee may be required to ask a court for permission before taking certain action
The fiduciary responsibilities shouldered by the trustee cannot be taken lightly. Trustees who fail to protect the trust, or act in the best interests of the beneficiaries, may be held personally liable.
Learn More About Trust Administration.
Handling a trust is not easy. The attorneys at Virtus Law, PLLC, have the tools and experience to help you achieve the best result possible. To schedule an appointment, call us at 612.888.1000. Our main office is in Minneapolis, with other offices located in Maplewood, Cambridge, Edina, and Mendota Heights.