The management of a revocable living trust is intended to be a simple, private, inexpensive matter handled by the Settlor and those people the Settlor chooses, without court intervention. It is always a good idea to seek professional advice when taking over the management of another persons trust. Generally the roles, responsibilities, and duties can be explained quickly and stop many problems before then create harm.
The following are general guidelines that you should supplement with the specifics of the trust you will be managing; these guidelines are not intended to be specific advice for any particular situation. These guidelines apply to successor trustees who find themselves in charge of a trust.
There are three situations in which you may have assumed the title of Trustee: 1) The Settlor has been determined to be incapacitated as defined in the Trust; 2) The Settlor has died; or 3) The Settlor has resigned as the Trustee and either appointed you as the Successor Trustee or named you the Successor Trustee in the Trust document.
Regardless of why or how you came to be trustee, all successor trustees should keep a few general ideas in mind.
- You are handling someone else's property, not your own. When you act as a Trustee you should follow the rules and laws that apply to the trust. These rules and laws come from two sources. The first source is the trust document. In that document you will find many paragraphs that describe what you are allowed to do, what you are required to do, and what authority you have to exercise your own discretion in making decisions. The second source is the state and federal laws that apply to the trust.
A successor trustee should immediately familiarize himself or herself with the trust document, and any amendments to the trust, to be certain that the successor trustee knows what is expected and what is required by way of management, distributions, reporting, accounting, and any other specific duties that the trust might place on the trustee.
- You will be required to account for and explain your decisions and activities in the management of the trust. You will be required to provide regular accountings to the beneficiaries of the trust, and may be required to make certain reports to the tax authorities. Detailed records will make that reporting a lot easier. Your records might include detailed checking ledgers much like you would keep for your own checkbook. The records should show the check number, date, amount paid or received, whom the payment was from or to, and the purpose of the payment. Another good idea is to keep a journal or log book of activities for the trust, in which you would make notes about what you have done and why. You should have a good initial accounting where you list the assets at the time you took over the job.
- Clear communication between the trustee and the beneficiaries can avoid future misunderstandings.
- Avoid self-dealing. Do not have your spouse or family provide services for the trust if they will be paid for their work. If you feel that you must be involved people who you have a close relationships with, you should only do so after a full disclosure of the terms and circumstances and obtaining written approval from each of the beneficiaries. A small degree of formality now can avoid a major misunderstanding later when the trustee and the beneficiary may have quite different recollections of an arrangement.