I’m Named as Trustee or Beneficiary: Now What?
In the past I’ve written about what a trust is and whether a person needs a trust as part of their estate plan. If you haven’t read my most recent post, then I recommend you check it out at: /blog/what-is-a-trust-anyway/ . If you have been named as a Trustee of a Trust or if you are designated as a beneficiary of a Trust, you may be wondering what steps to take next. Unfortunately, while a Trust structure is a great way of accomplishing certain goals, the Trust fails to accomplish those goals if it is not properly administered.
By far, the most critical role in the proper administration of a Trust is that fulfilled by the Trustee. If the Trustee fails to act appropriately with respect to the Trust, then the Trust may not achieve its objective and the Trustee may be subject to penalty and personal liability. Unfortunately, many individuals named as Trustee either fail to receive advice regarding their duties or they receive advice from professionals not sufficiently versed in the administrative duties and tax ramifications of actions as Trustee.
It is most critical for a Trustee to first read the Trust document and to understand the terms of the Trust as well as the requirements that they are required to fulfill under state law. The assets held within the Trust do not belong to the Trustee to do with as they please. A Trustee has a duty to inform the beneficiaries of the Trust about what assets are held in the Trust and to report on a regular basis regarding the income and expenses of the Trust. In addition, a Trustee has a duty to diversify Trust investments pursuant to the State’s Uniform Prudent Investor Act and a duty to make unproductive assets productive. A Trustee also has a duty to balance the needs of the current beneficiary with the rights of the remainder beneficiaries. In addition, a Trustee must file annual state and federal fiduciary income tax returns. If this seems like a lot, it is just the beginning.
Overall, a Trustee must exercise care, loyalty and prudence. However, the job as a Trustee is not insurmountable, so long as a Trustee receives advice from an advisor who is an expert in dealing with Trusts. Individual Trustees often do an excellent job of maintaining trusts, since they are often familiar with the unique needs and personal situation of the trust beneficiaries. However, these Trustees often seek assistance from attorneys specializing in the practice to be sure that they are prudently managing investments, reporting as required, and avoiding potential liability by avoiding situations such as self-dealing or improper investing.
If you are considering a Trust as part of your estate plan, but are concerned that the role of Trustee is too much for a family member or that a family member may not seek expert advice, then you may wish to consider a corporate Trustee. Corporate Trustees (such as a Trust department within a bank or private Trust company) are extremely well-versed in managing trust assets and have policies and procedures in place to ensure appropriate administration. While many may be hesitant to name a corporate Trustee due to the fees that they charge, the skilled investment advice and management provided by a corporate Trustee is often well worth the fees involved.
If you are the beneficiary of a Trust, you do not have the same duties that a Trustee has. However, you are wise to be aware of what duties the Trustee has. For example, you should receive an annual accounting detailing the Trust income and expenses. You should review the accounting and ask questions regarding items that are confusing. Also, if you need a distribution from the Trust, you should be aware of what parameters exist regarding distributions. The Trustee may be limited in what he or she may distribute, or the Trustee may require some proof that a distribution from the Trust is necessary for everyday support rather than for a luxury item. If you are a beneficiary of a Trust and discover that the Trustee is not appropriately administering the trust, then your time to enforce your rights as the beneficiary may be limited and it would be wise to seek the advice of experienced counsel.
Overall, Trusts serve an important function in many estate plans. Where they fail is often when a Trustee is not aware of his or her duties and when a beneficiary is not informed of his or her rights as a beneficiary. It is always best to seek the advice of counsel who is well versed in the administration of Trusts in order to ensure that a Trust can accomplish the objective for which it was established.
Ask Dan: Dogs & Seasonal Allergies
Hook Law Center: Do dogs get seasonal allergies?
Dan: My name is Dan and I am an English Labrador Retriever. I am a year and a half old so I am still a puppy and I LOVE to play. I was born near Gloucester, Virginia, but now I live in the Outer Banks of North Carolina. My favorite things are playing with my squeaky toys, chewing on my yak cheese bone, and getting wet and muddy in the Albemarle and Currituck Sounds – especially when my owner is dressed in her lawyer suit and seems to be in a hurry to get to a meeting!
My owner seems to be sneezing a lot and I’ve heard her talk about something called “seasonal allergies.” It turns out that pets can have seasonal allergies the same way that people do. Allergies are reactions that both humans and pets have to allergens which exist at certain times of the year. Seasonal allergies refer to allergens such as pollens and mold which are present at certain times of the year. These are often noticed mostly when the seasons change, so different pollens and molds are present.
Humans may exhibit symptoms such as sneezing, a runny nose, itchy eyes, and coughing. Dogs may have itchy skin, ear infections, red eyes, a runny nose, and sneezing. Cats most often show signs of allergies in their fur coat or skin. Even other pets such as birds, hamsters, rabbits, and chickens can have allergies.
If you think you have seasonal allergies, make sure your human notices. In many cases they will go away on their own, but sometimes they can lead to injury such as raw skin or hair loss. Not to mention, they are just plain uncomfortable. If that is the case, have your human take you to see your favorite veterinarian. Not only will the vet make you feel better, they usually give treats!
Letha Sgritta McDowell
757-399-7506 | 252-722-2890
Letha Sgritta McDowell is a Shareholder of Hook Law practicing in the areas of estate planning, elder law, special needs planning, estate and trust administration, asset protection planning, long-term care planning, personal injury settlement consulting, guardianships & conservatorships, and tax law. Ms. McDowell’s clients range from high-net-worth individuals with over $75 million in net worth to families with limited assets.
Ms. McDowell is a past President of the National Academy of Elder Law Attorneys and was named as a Fellow of the prestigious American College of Trusts and Estates Council (“ACTEC”) in 2020. She is certified as an elder law attorney by the National Elder Law Foundation (“CELA”) and Board Certified as a specialist in Elder Law by the North Carolina State Bar Board of Legal Specialization. Furthermore, McDowell is accredited to prepare and prosecute claims with the Department of Veterans Affairs.
Ms. McDowell is currently the chair of NAELA’s strategic planning committee, a member of the Board of Directors for the North Carolina Chapter of NAELA, and a member of the Board of Directors for the Purdue Center for Cancer Research. She is the former Chair of the North Carolina State Bar’s Elder Law Specialization Committee and is the former Editor-in-Chief of “Gray Matters”, the newsletter for the Elder Law Section of the North Carolina Bar Association. She is a consultant for InterActive Legal and has worked on several law and technology initiatives including IBM’s Watson project. Along with her experience practicing as an attorney, she has dedicated much of her time writing for national publications including, but not limited to: Wolters Kluwer, Wealthmanagement.com, the NAELA Journal, Trust & Estates Magazine and many more.
- Elder Law
- Estate & Trust Administration
- Estate Planning
- Asset Protection Planning
- Long-Term Care Planning
- Special Needs Planning