A trust can be a great way to protect assets for loved ones who are set to inherit them. Yet, the effectiveness of a trust is often left in the hands of a trust administrator. This person may be named by the individual who created the trust, or he or she may be appointed by the probate court. Either way, the trust administrator, also called a trustee, carries a heavy responsibility that often comes under close scrutiny.
Trust administrators are considered fiduciaries, meaning that they have a duty to act in the best interests of named beneficiaries. Therefore, in some cases beneficiaries claim that trust administrators fail to properly invest trust assets in a way that further the beneficiary’s best interests.
This is why trustees should make sure they are following state investment laws and consider developing an investment policy that clearly delineates the goals that are being pursued. Those who are administering a trust should refrain from merely maintaining the investments in place when a trust’s creator passes away, as this may not shield them from liability if an heir claims that the trust assets are being mishandled.
Trustees also have to make sure that tax matters are handled in a timely fashion. This means filing tax returns pertaining to the trust and its assets, as well as providing tax statements to beneficiaries. Any tax penalties that are imposed on the trust may be redirected to a trustee due to liability in ensuring timely filing.
Serving as a trustee can be immensely rewarding, but it can also be stressful. However, with a firm understanding of the law as it pertains to these matters, individuals can proceed with confidence in their actions. Oftentimes, Californians seek out legal assistance when handling trust matters, from creation to administration, which is why firms like ours stand ready to help.