Trustee: an Honor and a Responsibility, 02-28-2009

You are named as Successor Trustee in your parent’s, sibling’s, or other loved one’s Trust. This is an honor and a responsibility. Of course, it is an honor because they have chosen you to carry out the wishes closest to their heart. It is a responsibility because the actions you make can have serious legal and tax consequences.

As Successor Trustee, when the initial Trustee (usually the “grantor” or owner of the Trust) dies, you become Trustee. As Trustee, it is your responsibility to administer the Trust. In other words, you must gather all the assets, manage them, and distribute them according to its terms. In doing so, you have many decisions to make. When will you make distributions to subtrusts or beneficiaries? Are any estate taxes owed? Are any income taxes owed by the Trust grantor or the Trust itself? If the Trust directs you to create subtrusts, which assets should you put in which subtrust? What valuation date do you use, the date the grantor died or the date you are funding the subtrust? These choices could have income and estate tax consequences for the beneficiaries of the Trust for years to come.

Answers to some of these questions may seem deceptively simple. For example, how should you invest the assets? Depending on the terms of the trust and state law, you may have different duties. Let’s say you simply leave the assets the way they were invested before the initial Trustee died. This may not be prudent, especially in a down market, and you may be held responsible for losses the Trust and its beneficiaries suffer as a result.

The answer to each of these questions varies depending upon the unique circumstances of your case and state and federal law. While it is typically easier and less expensive to administer a Trust than to administer a probate estate under a Will, you need professional advice to complete the Trust administration process. Consulting a qualified estate planning attorney from Morris Hall helps prevent errors in Trust administration–errors which would have cost the Trust and its beneficiaries in increased taxes and forgone opportunities.

Take a couple weeks to grieve. But, then act quickly. There are deadlines for tax and other filings and the clock is ticking.