Representation of Trustees
If a decedent had a properly drafted and funded trust, probate is generally not required. Unlike a will, a trust is a private document and need not be filed with the probate court. Nonetheless, the successor trustee must still take steps to administer the trust: Beneficiaries must be contacted and kept informed; the grantor’s assets gathered and properly invested or maintained; any debts and expenses paid; potential creditors notified; taxes filed and paid; assets and/or income distributed in conformity with trust provisions to beneficiaries, etc.
Successor trustees often lack the time, resources or knowledge to personally administer the trust, and therefore may call upon legal, accounting and investment professionals for assistance.
Successor Trustee Duties
Below is a summary of the basic obligations of a successor trustee of a living trust:
- Show loyalty to all trust beneficiaries. Even if the successor trustee is himself/herself a beneficiary, as trustee he/she has the duty of loyalty to all the other beneficiaries, including the remainder beneficiaries.
- Deal impartially with beneficiaries. The successor trustee cannot favor the income beneficiary over the interests of the remainder beneficiaries.
- Make the trust property productive of income. This duty is violated if the successor trustee keeps large amounts in a checking account that does not pay interest and does not grow in value.
- Invest only in prudent investments. Florida has adopted the prudent investor rule, Florida Statute Section 518.11, which requires in part the review of investments and implementation of a formal investment plan and the diversity of investments, unless specific reasons are present not to diversify.
- Account to beneficiaries and keep beneficiaries informed.
- Notice of Trust. Florida Statute § 737.308 requires that upon the grantor’s death a Trustee file a Notice of Trust with the court of the county of the grantor’s domicile and the court having jurisdiction of the grantor’s estate.
- Keep trust assets separate. The successor trustee must keep the assets of each trust separate and keep his/her personal assets separate from the trust assets. This requires separate bank accounts, brokerage accounts, and safe deposit boxes for trust assets.
- Avoid conflicts of interest and self-dealing. The successor trustee cannot buy assets from the trust or sell his/her personal assets to the trust. He/she cannot favor himself/herself as a beneficiary at the expense of any other remainder or potential remainder beneficiary.
- Preserve the trust assets and uphold the trust. The successor trustee is liable if trust assets are lost, misplaced or destroyed because of inattention or negligence. The successor trustee should always be certain that all trust assets are appropriately insured.
- File tax returns and pay any tax due.
- Distribute income to those entitled (if applicable).
- Handle trust expenses. The administration of the trust necessarily requires certain expenditures. Example of expenses include: CPA fees, legal services, trustee fees, house maintenance expenses (if applicable), property insurance, and taxes of any kind. Every check written by the successor trustee and each direct charge to a trust's bank or brokerage account is considered a trust expenses. Expenses must also be appropriately apportioned between the income side and the principal side.
- Delegate investment functions if necessary. In many instances, individual trustees are not equipped to comply with their investment responsibilities. In these cases, investment professionals may be retained. The successor trustee is obligated to exercise reasonable care, judgment and caution in selecting an investment agent.
- Good record keeping. Keeping accurate, up-to-date and comprehensive records is one of the most difficult jobs a successor trustee must perform. If keeping records is too burdensome for the successor trustee, he/she can retain the assistance of an attorney, a CPA, a bank trust department or other professional to do the work on a fee basis.
The tasks above can be overwhelming to a successor trustee, but our experienced attorneys have handled hundreds of trust administration cases and can provide excellent advice and guidance to ease the burden of meeting each legal requirement / duty. Call us today for a consultation on how we can assist you as a Trustee.