If you are contemplating putting together a trust to pass on some of your assets, it’s good to know what trust administration actually means. As the person serving as grantor of the trust, you should be aware of what’s required to put one together and who the key players are in generating a trust. Trust administration can be complex based on legal requirements, tax issues, managing investments and real estate, and the financial condition of the estate that is linked to the trust.
What is Trust Administration?
Trust administration simply refers to the process of carrying out the instructions contained in a trust document. The trust has the potential to work on behalf of the Grantor (also called Settlor) whether the Grantor is still alive, especially if the Grantor becomes incapacitated, or unable to manage his or her own affairs. Then the Trustee must manage the trust for the benefit of the Grantor.
Once the Grantor passes away, then then the Trustee must follow the instructions of the trust (and of course Michigan law) to administer the trust for the benefit of the remaining beneficiaries. The job of the trustee is to administer the trust for the benefit of all the beneficiaries, reach out for help from financial or legal professionals that can provide insight if necessary, and manage the fiduciary and legal duties required by trust law.
Choosing a Trustee
Selecting the right trustee is a critical component of putting together your trust, since trust administration can take a lot of attention and time. The key aspect of who will make the best trustee is trust. Some people make the mistake of choosing the child who is oldest, or who lives closest, instead of thinking through who can be trusted to do the best job for all of the beneficiaries. This can be a difficult decision to make, but it is very important.
Serving as a trustee is no easy task. There is a lot of work that must be managed, both while the person who created the trust is alive, but not competent, and after he or she passes away. This includes notifying heirs, inventorying assets and any debts, managing investments, evaluating estate taxes, negotiating with and paying creditors, deciding when and how to sell real estate, and keeping all of the beneficiaries informed … among many other duties. While there are many cases in which trust administration goes smoothly, this is not always the case. Arguments over inheritances or the financial state of the trust assets can flare up and case problems, especially when a trustee does not act fairly in everyone’s best interests.
You can set up the trust for success by working with high-quality Michigan estate planning attorneys to ensure that the trustee carries out your wishes from the start. And it begins with choosing the right trustee.
Experience and Sense Matter
In setting up your trust and selecting the right trustee, relying on the advice of an experienced Michigan trust attorney certainly helps, but don’t be afraid to also use common sense as a guide. You probably don’t need a financial or legal professional to act as trustee, unless you have complex concerns and assets. Remember, any trustee you choose can hire the right legal and financial professionals to advise him or her (and be paid from the trust assets).
There’s a lot of debate about whether corporate trustees, such as banks, are a good tool to use for serving as trustees. The positive aspect of doing this is that banks and other corporate trustees have the sophistication to manage complicated trust assets, and can stay neutral in the face of heated family dynamics. But, corporate trustees tend to cost more and are more likely to be impersonal. It’s quite likely that you already know someone who possesses the necessary judgment skills, common sense, and commitment to do a good job for you, but corporate trustees are a consideration for many people with significant assets.
And keep in mind that you should factor in a potential trustee’s age and health. A person may be a good choice today, but not so in ten, twenty, or thirty years. For the same reason, it’s a good idea to name back-up trustees in the event that something happens to your first choice (or second, or even third). In fact, just having a single back-up choice is not usually enough.
To learn more about setting up a trust the right way, contact us today for a free consultation for all your estate planning needs. Giving you personalized service and ensuring that all your questions are answered is important to us. Reach out to the attorneys at Barron, Rosenberg, Mayoras & Mayoras, P.C. at (248) 641-7070.
We are also experienced in working with trustees to make sure that trust administration goes smoothly, and is done in compliance with Michigan law. Trustees shouldn’t have to go it alone!