There are different types of trusts that satisfy a varied array of objectives. Some of them are irrevocable, and there is a very commonly utilized type of trust called a revocable living trust. We are going to take a look at trust administration in this blog post, and we will focus on the way that a revocable living trust is administered since it is the trust that is useful for most individuals.
If you were to establish a revocable living trust, you would be called the grantor of the trust. You would convey assets into the trust that you intend to leave to your loved ones after you pass away. The individual or entity that administers the trust is called the trustee, and the people that will be receiving distributions from the trust are called the beneficiaries.
While you are alive, you can act as the trustee and the beneficiary, so you would maintain complete control of the assets in the trust. Plus, since the trust is in fact revocable, you could choose to dissolve it entirely if you ever decide to do so. It is also possible to convey property into the trust after it has been established, and you could add or remove a beneficiary at any time.
When you are establishing the terms of the trust, you have the ability to do things with a living trust that you would not be able to be if you were to use a last will as your primary vehicle of asset transfer. With a last will, you would be allowing for lump-sum distributions to the beneficiaries, but things are different with a revocable living trust.
To provide an example, let’s say that you have a person on your inheritance list that has never been good managing money. He has frequently come to you seeking loans, and you are concerned about the possibility of this family member squandering his inheritance too quickly. You will be gone, so there would be nowhere for him to turn for financial assistance.
It would be possible to account for this when you are establishing the trust agreement. Let’s assume that you have conveyed appreciable investments into the trust. You could instruct the trustee to distribute the earnings from the trust to this spendthrift beneficiary on a monthly basis. If you want the trustee to distribute portions of the principal on a discretionary basis under certain circumstances, you would be free to include this stipulation.
Selecting a Trustee
When you are choosing a trustee to succeed you after you pass away, you can empower someone that you know personally. However, there are some considerations that you should take into account before you make this choice. First of all, you may not know anyone that has any experience administering a revocable living trust. Secondly, there is time and effort involved, so you have to find someone that has the spare time to take care of all the trust administration tasks.
There is also the matter of conflicts of interest. If you name a trustee that knows all of the beneficiaries personally, there can be favoritism, either real or imagined. This can cause acrimony among interested parties. The anticipated longevity of the trustee is another factor to take into consideration.
All of these potential drawbacks can be avoided if you were to utilize a professional fiduciary to administer the trust after your passing. There would certainly be no conflicts of interest, because the bank or trust company would be totally objective. These professionals certainly know how to administer trusts, and you can rely on them to make intelligent investment decisions. The institution will always be around, so there would be no longevity issues, and there would be inheriting oversight within the organization.
Regardless of the trustee that you choose, immediately after your passing, your family will inevitably need assistance with regard to the next phase. We can be engaged to provide trust administration assistance, and we would be more than glad to guide your family through the process.
Attend a Free Seminar!
We have provided a bit of basic information in this post, but you can learn much more if you attend one of our estate planning seminars. There are a number of sessions coming up in the near future, so you should be able to find a seminar that fits into your schedule. They are free to attend, but we do ask that you register in advance. You can visit our seminar page to get all the details.