Nay & Friedenberg’s attorneys often provide legal advice to trustees.
A trust is created by a legal document under which money and other property benefit someone, but are not owned by him or her. They are owned by the trust. The person responsible for making sure they are managed properly is the trustee.
Trusts are often created inside a will or living trust because there is some complication that would make a straightforward bequest problematic. For example:
- A person wants to provide for a spouse during his or her lifetime but wants property to ultimately go to the children from a previous marriage
- The heir is a minor who cannot legally manage assets
- The heir is mentally ill or incapable of managing assets wisely due to an addiction
Typically, we will be consulted when:
- The trust is created and a trustee is named
- A trustee resigns or dies and a new trustee must take over
- Assistance is needed in the administration of the trust
Most often, the trustee will be a family member chosen because he or she is honest, is not under anyone else’s influence, and has the time and resources to administer the trust.
Because this is not the trustee’s primary occupation, he or she will have questions about their duties.
We make sure the trustee understands his or her rights, responsibilities, and limitations. Examples include:
- When someone becomes a trustee, there are certain legal notices the trustee must give to the beneficiaries, informing them of the terms of the trust, his or her role as trustee, and their right to receive regular accounting of trust assets and disbursements.
- When a trust becomes active, (usually when the person who established it dies), the trustee must identify the beneficiaries, take control of the assets, and follow the instructions in the trust document for the disbursement and management of those assets.
- Administrative issues such as the investment risk of trust investments, distribution parameters as applied to specific assets and trustee fees.
In the course of carrying out trustee duties, issues can arise that make seeking our advice a good idea. For example:
- There is a conflict between the interests of two different beneficiaries: one who wants the trust assets invested for maximum income and one who wants them invested for long-term increase in value
- There is language in the trust document that is unclear
- A beneficiary has passed away or has become disabled
At some point every trust comes to an end. Most trusts are meant to provide for no more than two or three generations. To close out a trust, the trustee must:
- Marshall all the assets
- Identify the beneficiaries
- Pay final administrative expenses
- Distribute the assets to the beneficiaries
- Hold a small reserve to pay the final taxes
We instruct so that all of this is done properly.
In short, people consult with us because they need advice on how to be a responsible trustee and would like assistance in meeting all the legal requirements of this important position.