Video Summary
What are the duties of a trustee named in a trust? The most common scenario we see is whenever someone comes in and they set up a trust during their lifetime, which is called a living trust or a revocable trust, where they name themselves, and then they provide who their assets are going to be distributed to under the provisions of the trust, and name a successor trustee.
During the person’s lifetime they can pretty well treat the trust assets any way they want to since it’s for their benefit. Upon their death, the revocable trust becomes irrevocable, and the successor trustee then assumes the responsibilities, and they are to send a copy of the trust to all the beneficiaries, whether they be income beneficiaries, whether they like the beneficiaries or not, but they’re to send a copy of the trust to everyone.
They’re also to file a notice of trust in the public records. After having sent out the trust and recorded the notice of trust with the probate court, then they go about obtaining an inventory of all the assets that are in the trust. Once that’s accomplished, they need to obtain a federal identification number so that an accounting or a tax return can be filed by them so that they don’t have to pay any taxes.
Now during the lifetime of someone who sets up a trust for their own benefit, they’re not required to get a federal identification number, and can use their Social Security number. However, upon their death, the successor trustee has to have a federal identification number in order to file a fiduciary tax return, and that would govern how the people are to pay taxes on the money that they receive or the income that they receive from the trust, and that would be something that the successor trustee would want to consult with the attorney about, as far as the administration of the trust and the distribution of the assets, in particular, if there is homestead property involved, if there’s property in the name of the decedent, and we need to go through a probate proceeding in order to obtain those assets to be titled in the trust, and then the trustee must be very careful in reviewing the provisions of the trust to see what they’re directed to do. If it says simply, “Distribute out at my death as soon as possible to the named beneficiaries,” well, you need to make sure that the creditors are paid, and then have an accounting of everyone, as far as the inventory, to make distribution, and then file a fiduciary tax return with the Internal Revenue Service so that the income can be accounted for, and you can be compensated as trustee in order to be able to fulfill your duties as a trustee.
If this is a continuing trust, meaning that you must pay the income to a beneficiary for an extended period of time, then you need to consult with an attorney concerning your investment responsibilities and financial responsibilities, and that you’re governed under the Prudent Investor Act. There’s a whole trust code, a bunch of rules and laws as to what you’re obligated to do, and I would urge you to consult with an attorney about a trust administration.
If you have any questions, give me a call at 727-847-2288.
Thank you.