Appropriate trust administration is paramount when your assets are weaved into a trust and your beneficiaries are dependent on it. Choosing the type of trust and appointing a trustee is critical. Mistakes can lead to challenges, and that means your intended beneficiaries, like children, may not get what you want them to have, while others, like creditors, may get what you don't want them to have.
Prestige Law Office, LLC, (the "firm") will construct and administer trusts to safeguard your assets and benefit your loved ones. Further, the firm represents individuals and families, fiduciaries, and businesses in all types of estate matters. The firm covers many areas of estate planning, including administration, trusts, wills, and the asset transfers that come with them. Contact the firm at 414-459-1632 to schedule a Consultation today.
What Is Trust Administration?
When trusts are created, the terms for their administration are contained within them. The person who creates the trust is known as the grantor, and the person whom the trustor appoints to administer the trust is called the trustee. The trustee administers the trust by following the terms of the trust and acting in the best interest of the beneficiary (or beneficiaries).
Often, trust administration begins when the grantor passes away, but this is dependent on the trust and its terms and conditions.
How Is a Trust Administered in Wisconsin?
There are certain steps and procedures that should be followed in order to properly administer a trust. While they may differ by jurisdiction and pursuant to the terms of each trust, some of the more common elements of the process are described below.
Know Your Trust
A trustee needs to be aware of everything there is to know about the trust they are tasked with administering. Reading the terms of the trust is a good place to start. The trustee will also need to gather all the documentation that he/she can obtain that will help him/her know exactly what the trust entails. Trust documents include the following: bank statements, rental agreements, life insurance policies, and certified copies of the grantor's death certificate.
There may be other documents the trustee needs to understand the trust. The trust itself should clarify what these are.
Secure Trust Assets
After ascertaining what the trust assets are, the trustee will need to secure them. This may entail ensuring the assets are properly titled, as well as taking an inventory of the assets. The trustee will also need to determine what the assets are worth.
Trust assets come in a variety of forms, including life insurance proceeds, real property, investment accounts, and personal property (such as jewelry).
Trustees are often required to open a bank account in the name of the trust. This bank account can hold assets while the trust is administered. It will also provide a way for the trustee to show that they properly handled the assets of the trust.
Notify Beneficiaries
Part of the trust administration process is notifying any of the beneficiaries who are named in the trust. Beneficiaries need to know who the trustee is and the terms of the trust. Jurisdictions vary, and it may be that there is a timeline that must be adhered to for notifying beneficiaries. An estate planning lawyer in your area can advise you on this and other state-specific issues.
Notify Creditors and Pay Debts
The trustee should try to determine to whom the trust may be indebted, and notify them of the trust. The trustee should obtain copies of any and all claims against the trust and investigate them to ensure there is a valid debt that needs to be paid. Then, the trustee should take the proper steps to pay the debts, including any funeral or cremation expenses.
Distribute Trust Assets
At this point, it is time for the trustee to distribute the assets of the trust. Generally speaking, before that happens, the beneficiaries must be provided with an accounting of the trust. If they agree with how the trust was administered, they will need to sign off on the accounting. Then, the terms of the actual trust will dictate how the trustee administers the assets. There may be some room for discretion given to the trustee, or the trustee may not have any discretion. It all depends on the way the grantor created the trust.
Choosing a Trustee to Administer the Trust in Wisconsin
Because the trustee has a lot of power, it is important to choose a trustee whom you can trust. That said, a trustee cannot refuse to carry out the terms of the trust and cannot act in bad faith. Consider these factors when choosing a trustee:
- Time. It will require a lot of the trustee's time to administer the trust. A trustee is tasked with many different responsibilities specific to the trust, like filing income and estate tax returns, selling real estate, maintaining property and records, and finding and notifying creditors and beneficiaries, among other things.
- Skills. Is the trustee equipped with the right skills or expertise? Mistakes and mismanagement can happen when the trustee does not fully understand what to do and how to administer the trust.
- Cost. Some trustees, like corporate trustees, charge fees. You need to know what those fees are and how they will impact the trust. Also, a family member appointed as trustee may not charge a fee but may have to hire an attorney, and that will cost money. These are the things to consider before appointing a trustee.
Many times, people choose close friends or family members as trustees, but you may want to consider someone with the time and expertise, even if that will cost more than a family member. In the end, it may save you and your loved ones time and money.
Common Problems with Trust Administration in Wisconsin
Unfortunately, problems frequently occur in trust administration. Some of the more common issues are described below. The fundamental issue creating these problems, however, is typically poor drafting of the trust.
Beneficiary's Death or Incapacity
Beneficiaries may have passed away or become incapacitated since the trust was created. The trustee needs to ensure all beneficiaries are still living and able to receive their distribution. If not, the trustee will likely need advice from the court on how to proceed. But also, it is a good idea to put in place contingent beneficiaries so that if a beneficiary dies, there is another beneficiary in place to benefit from the trust.
Irrelevant Provisions
When trusts are not reviewed and their terms are not kept current, it is possible that some of the language used will become irrelevant. When this happens, the trustee will typically seek court direction on the best way to proceed.
Beneficiary Disagreement
Beneficiaries may not agree with some of the decisions made by the trustee. This is especially true when the trustee has discretion over the distribution of assets and a beneficiary disagrees with how the trustee uses that discretion. Another example is when a beneficiary does not agree with the terms of the trust and contests it. Litigation could ensue.
With all these problems, delays occur. Delays are costly. It is best to avoid these problems by making sure your trust is drafted properly and in compliance with the law.
Contact an Estate Planning Attorney in Milwaukee County Today
For a comprehensive and personalized plan that will meet your unique needs, contact Prestige Law Office, LLC, today to schedule a Consultation.
The firm handles estate planning for Wauwatosa, Pewaukee, Brookfield, Waukesha, Kenosha, Racine, Whitefish Bay, and the greater Milwaukee area. Give the firm a chance to help prepare your estate planning by scheduling a consultation and taking the first step in securing your future. Give the firm a chance to help administer your estate by scheduling a consultation and taking the first step in securing your future.