What is Trust Administration, and When Should You Get Professional Help?

Getting named successor trustee for a loved one’s trust is an honor. It means that someone in your life trusts you to act in their interests in the moments following their death. However, it is also natural for many people to feel overwhelmed by this responsibility.

Managing a trust that provides instructions for asset distribution after someone’s death comes with several complex legal, estate tax, investment, and compliance obligations. Without relevant expertise, the chances of mismanaging trust funds increase considerably.

As Texas-based estate planning attorneys, we have seen firsthand the pitfalls people face as they administer the trust they have been left to deal with. With guidance from an experienced trust administration attorney, you can feel assured that all trust duties are handled appropriately.

How Trust Administration Works in Texas

In most cases, administering a trust begins at the time of the trust creator’s death.

When this happens, the trustee must:

• Finalize Trust Assets: Collect information on accounts, titles, deeds, etc. to verify trust ownership. Obtain official date-of-death values, the death certificate, and appraisals.
• Pay Debts/Expenses: Settle any unpaid medical bills, taxes owed, and trustee/administration fees from trust funds.
• Manage Investments: Make prudent investment choices aligned with the needs of beneficiaries while preserving capital.
• Oversee Compliance: File required annual trust tax returns. Maintain thorough accounting records regarding each transaction. Consider trust accounting services where needed.
• Distribute Assets: Follow the distribution instructions in the trust document. Provide statements and communications to beneficiaries regarding distributions.

On top of these duties, trustees must understand and carefully adhere to relevant trust, tax and probate laws. The Texas Estates Code and Probate Code provide many strict procedural rules trustees must follow. Staying compliant minimizes legal liability.

But without proper legal, financial, and administrative knowledge, successfully balancing these competing trustee duties proves extremely difficult.

Why Settlors Designate Family or Friends as Trustees

If administering a trust seems so complex, why does the settlor name a family member or friend as successor trustee rather than a professional?

Reasons typically include:

• Greater perceived trust in someone they personally know – Settlors often assume friends/family will show better care, judgment, and integrity than an unknown third party.
• Desire to reduce trust administration fees – Appointing a corporate trustee usually means higher ongoing service fees, while naming a relative provides perceived cost savings.

However, these reasons are often based on assumptions about professionals’ skills and priorities. The truth is corporate trustees receive thorough training to handle trust administration and prioritize the beneficiaries’ interests.

Professionals ultimately help simplify the process for beneficiaries rather than making it more confusing or costly.

Risks of Using a Non-Professional Successor Trustee

Becoming a trustee without enough legal and financial experience can cause problems later on.

Some common issues that untrained trustees face include:

• Analysis Paralysis – Lacking experience with trust administration procedures causes delays or inaction. Some successor trustees even refuse the appointment once learning what it entails.
• Increased Litigation Risk – Well-intentioned mistakes stemming from ignorance of probate code requirements open the door to disgruntled beneficiaries trying to contest the trust.
• Poor Investment Decisions – Investing trust assets improperly can severely erode a decedent’s financial legacy for heirs rather than preserving it.
• Tax & Reporting Noncompliance – Failure to handle required tax filings and account documentation appropriately also invites litigation from frustrated beneficiaries and fines from governmental agencies.

Legal liabilities and mismanagement risks prove a constant challenge for trustees who do not know what they are doing.

Without a thorough working knowledge of trusts and estates’ legal and financial intricacies, trustee liability and mismanagement pitfalls abound for unsuspecting family/friend appointees.

Why Hire a Corporate Trustee for Trust Administration

Naming someone without enough training as your trustee can lead to legal and money problems later on. Instead, picking a professional corporate trustee offers more reliability for you and the beneficiaries.

Some benefits of using a corporate trustee like a trust company or law firm include:

• Specialized Expertise: They focus fully on estate and trust administration. Corporate trustees get extensive legal, financial, tax, and investment training to manage different trusts.
• More Protections: They closely follow all fiduciary duty, compliance, and risk management laws protecting beneficiaries. Their credit, assets, and longevity provide added safety.
• Consistency: A company trustee won’t pass away or resign like a person might. This allows steady guidance of your trust for many years.

Choosing a corporate trustee is better for upholding a settlor’s wishes while protecting heirs’ inheritance money.

We Guide Successor Trustees Through Administration Duties

If you have recently been appointed successor trustee for a Texas trust, please know that our attorneys are here to help you navigate this role successfully. Whether you have a thorough grasp of fiduciary duties or feel totally lost regarding the next steps, we offer reliable guidance so you can serve the trust’s beneficiaries smoothly and compliantly.

With decades of combined Texas trust administration experience, the attorneys at Your Legacy Legal Care™ help simplify the complex trust hand-off process for successor trustees of all knowledge levels.

We provide actionable direction regarding:

• Collecting and securing trust assets
• Navigating debts, expenses, and investments
• Meeting filing requirements
• Distributing according to the settlor’s instructions
• Avoiding personal liability

Embark on your trust administration journey with Your Legacy Legal Care™. Contact us today to ensure precision in crafting your assets, passing them seamlessly into the hands of those you cherish the most.