Administering a trust is never a walk in the park. That’s why estates retain the services of trust attorneys to help trustees figure things out. Even if a trust has named several trustees, things won’t be smooth if they don’t understand their duties and responsibilities. Find out what your responsibilities are if you get named as a co-trustee or successor trustee.
What is a co-trustee?
A co-trustee is a person or entity that serves as a legal owner of trust property. They hold and administers the property for the advantage of named beneficiaries.
Trusts are created by property owners, aka grantor, trustor, or settlor. A property owner can be one individual or many, in the case of joint ownership. The trustor puts the property in the trustee’s hands to control the assets to benefit named beneficiaries. Most trusts name the grantor as the trustee. But it will be unwise to leave them as the sole trustee, so other people or entities are included as co-trustees. A co-trustee is a joint trustee.
Co-trustees jointly manage the assets in the trust. It’s paramount they know the extent of their powers over the assets. Trusts often include instructions that every trustee should follow. Everything should be done in the best interest of the named beneficiaries.
Cooperation of joint trustees
Furthermore, co-trustees must act collectively unless the trust explicitly grants certain responsibilities to a specific trustee. But even so, co-trustees should not act without the knowledge and full consent of fellow trustees.
A trust document should also clearly state the authority of joint trustees. Trustees who have objections to the decisions or actions of fellow trustees have the right to put in writing and file a petition in the courts to try and stop the trustee. That way, they are covered from any legal liability from the actions and decisions of the other trustee.
Power to control assets in the trust
Trustees are in charge of the grantor’s assets. The trust document may explain how the assets should be administered; however, in most cases, trustees are allowed the discretion to control and manage the asset as their experience dictates as long as it’s for the good of beneficiaries. For example, trustees can set up or close bank accounts, invest in particular stocks, sell or buy properties, etc… Still, they must record and inform the beneficiaries every step of the way.
Administer the trust
In the case of a living trust, the grantor should clearly state how assets are distributed, to whom, and when. The co-trustee will be in charge of distributing the trust’s assets as the grantor wishes.
Tax filing and settling legal debts
A co-trustee may also make arrangements to settle any tax arrears owed by the property in the trust. Taxes applicable on trust assets may include income and estate taxes. The co-trustee will file the applicable taxes with the relevant tax authorities. The money may come from the trust. Apart from taxes, the co-trustee may also arrange for the settlement of legal debts and any claims against items in trust. They may work with accountants and tax attorneys.
Co-trustee vs. successor trustee
If you’ve been named a successor trustee, you can breathe easily. A successor trustee is not the same as a co-trustee. Co-trustees duties are immediate, while a successor trustee waits until the trustee is incapacitated or dies to begin acting. However, that doesn’t mean you shouldn’t learn your responsibilities just yet. As a successor trustee, you will be responsible for:
- Trustor’s financial affairs
- Making sure the trustor is getting quality care
- Notify grantor’s family, friends, and work of their condition
- Keep records of medical expenses, file medical claims, and apply for benefits
- Notify co-trustees
- File taxes and settle legal debts and claims
- Collect death benefits
- Administer assets to beneficiaries according to grantor’s instructions
How is a successor trustee appointed?
As a successor trustee, you can be appointed under a trust deed or a trust relationship. Usually, it is mortgage companies that use trust deeds. They put a title company as the original trustee, but then they name a foreclosure company or attorney as successor trustee in the event of foreclosure.
On the other hand, an appointment under a trust relationship follows guidelines stipulated in the trust agreement. If there are no guidelines, beneficiaries can petition the court to appoint a successor trustee.
Do you need help figuring out your duties and responsibilities as a co-trustee or successor trustee? Give us a call. Trustees can hire attorneys, too, to help them navigate the complex side of trust management and administration so they don’t get into legal problems. Give us a call to find out how we can be of service.
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Trust administration manages the assets in a trust according to the Trust’s terms to benefit the heirs and beneficiaries following the grantor’s death. Trust administration is a multi-step process that involves mountainous paperwork and dealings with courts. Working with a trust attorney can be instrumental in streamlining the whole process.
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