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Tips for Smooth Trust Administration: A Guide for Trustees

Monday, March 10, 2014

Trust administration can be a complicated task. Also, it can raise a number of questions: (1) Who gets what asset?; (2) How do you reduce taxes?; (3) Who is in control when a trust gets established?

It is easy for some people to mismanage a trust, most especially when a trust does not elect a corporate trustee. Written here are some advice on the proper trust administration.

1. Record Keeping

In most places, trustees are required to provide enough, regular records to trust beneficiaries. In some regions, this includes remainder and current beneficiaries. The remainder beneficiaries are those who will receive properties when the trust is aborted. Keeping good records means keeping complete records of income, distributions, and assets. It is best to establish a good 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 huge piece of stock which has served the trust well for a number of years. But this isn't a good idea. A trustee is given a statutory duty to diversity investments comprehensively. Investment management is the phase which perhaps leads to the most litigation against a trustee.

3. Unbiased Distributions

Some trustees may favor certain beneficiaries with regards to asset distribution. But trustees have a fiduciary duty to both remainder and current beneficiaries. Many individual trustees don't completely realize that they have a duty to both beneficiaries, and at times there is a conflict of interest. There must be consideration for current income needs, and for capital appreciation also.

If a trustee is a family member, it can be very easy to bring personal bias into the trust administration. Once you've made a decision about asset distribution, put into black and white the reasons for either making or denying the distribution. Include documentation that would support your decision and show you gave due consideration to all circumstances and facts.

Although it may be an honor to be designated as a trustee, he needs to always remember that he is taking on a number of legal risks. A trustee could be held liable not only for losses in investing, but also for income that could have achieved from wiser investing. Usually, trustees feel that their personal relationship with the family can keep them from legal claims. But in the long run, the exposure won't be to the person who named you as the trustee; it will be to the beneficiaries. It is best to ask the experts about good trust administration services Perth if you have questions on proper trust administration. Check out Estate Administration Services for more information about trust administration.