Trust Administration Part 1
So what is “Trust Administration”?
So what exactly does “trust administration” mean? Administering a trust is simply carrying on the tasks that the trust was established to perform. So next are probably thinking “who is it is performing these tasks?”
You can’t tell the Players without a Program!
Well, actually it is not that tough! In case you haven’t read some of the information on my website or some of my other blogs, let me explain quickly who the players are. There are three “titles”, or “people” involved in a trust. You do not need three individual people to fill these roles but for the purposes of this blog and simplicity this is how they will be described. The first person needed for a trust is the person who creates the trust. This person is called the Trustor, or Settlor of the trust. The Trustor funds the trust with certain property. The next role is that of the Trustee. The Trustee manages and administers the trust property according to the terms of the trust. The Trustee manages the trust for the benefit of the third person that we need to discuss. This third person is called the Beneficiary. There is somewhat of a legal fiction that occurs with the property that is transferred into the trust and that is that the title of the property is split into two forms. The first form is “legal title”. The second form is “equitable title”. The Trustee holds the legal title, and the beneficiary obtains the equitable title. This is at the heart of why a trust can be so useful. For example, a special needs trust is established to prevent a minor or an adult beneficiary that is receiving means tested Public benefits from losing those benefits due to a large payout of an inheritance or trust fund. Because the beneficiary does not hold the legal title and cannot control the distribution of funds from the trust (because that is the Trustee’s duty) they are not thought to possess the whole.
So what is a Trustee to Do?
So we know that the Trustee administers the trust for the benefit of the Beneficiary. What is the Trustees specific duties, and are there legal ramifications for a Trustees failure? A Trustees specific duties can come from a couple of sources. The first source is the trust itself. The second sources from the law (to put it in a general way). I won’t go into great detail here, however, suffice it to say that a Trustees duties are not to be taken lightly – and yes, there can be serious legal consequences for any number of failures by the Trustee.
Often times attorneys are asked to serve as Trustees. Most California estate planning attorneys will refuse to do so. One reason an estate planning attorney will refuse to serve is because of the California Probate Code as well as ethical considerations (if you would like to read some about it, check section 15642, 21380 and 21382 of the California Probate Code here http://leginfo.legislature.ca.gov/faces/codesTOCSelected.xhtml?tocCode=PROB&tocTitle=+Probate+Code+-+PROB . It is not always completely prohibited, but in almost all circumstances it can produce more problems than it is worth to any of the parties involved. There can be ethical problems associated with acting as trustee for your client / Settlor such as the duty to be impartial, exposing other members of the law firm to liability, etc.
See lots of estate planning information on my website at: www.myestate-plan.com
Please see my other blogs on “Trust Administration”, and “Trustee – duties”, and “Trustee – who can serve”.
Thanks for reading!
William Daniel Powell
Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California. Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. this is why I speak in generalities. Thanks again for reading.