If your loved one has named you to serve as a trustee or a successor trustee for his or her trust, it is important for you to understand the duties that you will have. If you are a successor trustee, you won’t have to do anything unless the grantor becomes incapacitated or passes away. If you are a current trustee, your duties may be more immediate. Elder Care Direction offers information to elderly adults and their loved ones to help guide them through the many issues that may be involved with aging.
What are trusts?
Trusts are legal entities that can be established to own assets. A trust document can be drawn up to accomplish a number of different purposes. Trusts include instructions for how your financial affairs should be handled and how to distribute your assets after you pass away. There are several main types of trusts, including the following:
- Testamentary trusts
- Irrevocable trusts
- Revocable living trusts
Many people choose revocable living trusts in their estate plans because assets that are held in trusts do not have to go through the probate process. Revocable living trusts allow the grantors to change the trust documents, remove and add assets, and terminate them at any time.
How living trusts work
When you draft a living trust, you must then fund it by transferring your asset into the trust. You must change the titles of the assets into your trust’s name. This makes it easier for a trustee or successor trustee to manage your financial affairs if you are incapacitated or die.
People who are involved in a living trust
The following people are involved in a living trust:
- Grantor – Person who creates the trust
- Trustee – Person who manages the trust assets
- Successor trustee – Person who will step in to manage the trust when the trustee can no longer do so
- Beneficiaries – People or organizations who will receive distributions from the trust after the grantors pass away
Things that current trustees need to know
In many cases, the grantor of a trust will also serve as the trustee. However, if you have been named as a trustee for someone else’s trust, you will need to know where the trust assets, trust document, insurance policies, and other important documents are located. You should also make certain that the titles and beneficiary designations have been retitled to the trust’s name. You will also need to know who the successor trustee is and who the beneficiaries are and if you will be serving as a co-trustee with somebody else.
Responsibilities of trustees
Trustees have multiple responsibilities, including the following:
- Follow the provisions of the trust document
- Avoid commingling trust assets with your own
- Avoid using trust assets for their personal benefit
- Treat beneficiaries equally
- Invest trust assets prudently
- Keep accurate records, file tax returns, and report to the beneficiaries as required by the trust
Trust documents normally include instructions for how to determine that the grantors are incapacitated. This may include certifications from one or more doctors of the grantor’s inability to manage his or her own financial affairs.
If the grantor is determined to be incapacitated, you will then begin managing his or her affairs easily as long as the assets have been transferred to the trust. You should make certain that the grantor is receiving proper care in a good environment. You will need to provide the physician with copies of the health care documents such as the medical power o attorney and living will. You should also notify anyone who has been appointed to make important health care decisions on behalf of the grantor. Finally, you should offer to help to notify the grantor’s family members and employer.
The next step will be for you to locate and review the trust document and to notify any co-trustee. Call the attorney who drafted the trust document if you have questions. The attorney may provide you with a certificate of trust that proves that you have been granted the legal authority to act.
Familiarizing yourself with the insurance policies of the grantor is important. This can help you to avoid making the mistake of assuming that a certain facility or procedure will be covered when it is not.
You will want to get a certification document of the grantor’s incapacity so that you can give copies to the bank and other institutions. They will need to see the certificate of trust and the document of incapacity before they will allow you to conduct business on behalf of the grantor.
If the grantor has dependents, you will be responsible for ensuring that they are cared for properly. There may be specific instructions in the trust. If the incapacity will likely last for a lengthy period of time, a guardian might need to be appointed by the court for the minors.
You should also know where the trust assets are located and how much they are currently worth. You will need to understand where the trust income comes from, when it is paid, and how much it is. You might need to draw up a budget to manage the income, assets, and expenses.
You will next need to apply for disability benefits on behalf of the incapacitated grantor. Applications might be made through the grantor’s long-term disability insurance, the Social Security Administration, the Veteran’s Administration, or the Employer. Make certain to notify the grantor’s bank that you are serving as the trustee. Make certain to consult with professionals before you sell any of the trust assets.
You will need to receive money, deposit funds, pay the expenses, and use the grantor’s assets to take care of the grantor and his or her dependents until the grantor either recovers or dies.
While you serve as a trustee, it is crucial that you keep careful records of all of the expenses. You should keep a ledger, and you may need to send a full accounting to the beneficiaries. you will also need to file the income and property taxes on time.
When the grantor dies
People who serve as trustees after the grantor dies are responsible for ensuring that everything is completed properly and promptly. Your duties will include the following:
- Let the family know that you have been named as the trustee and offer to help with the funeral;
- Review the trust document with a lawyer to make certain that you understand the assets and your responsibilities;
- Value all of the trust assets;
- Collect death benefits and deposit them in an interest-bearing account until distribution
- Notify the necessary institutions about the grantor’s death and your role as a trustee;
- Keep careful records of all final expenses;
- Prepare and file final estate tax and income tax returns
- Pay the expenses; and
- Distribute the assets as called for in the trust.
Are trustees paid?
Trustees normally receive reasonable compensation for their work. How you might be paid should be outlined in the trust document.
Talk to the team at Elder Care Direction
Agreeing to be named as a trustee is a big responsibility. If you think that you might not be able to fulfill the duties, you might want to talk to an attorney. Elder Care Direction can save you time and money by assisting you with documents preparation, and we can refer you to one of our knowledgeable partner attorneys. To learn more, call Elder Care Direction today.