Trust Administration

A trust is often the preferred way to administer your assets in the event of your incapacity or death.  The trustee is charged with following the instructions you have provided on how to administer your assets for the remainder of your life and after your death.  The trustee may need to establish different sub-trusts for your spouse and children.  The trustee is a “fiduciary” and generally must act in the best interest of all the beneficiaries, both the current beneficiaries and remainder beneficiaries.  There are various other responsibilities and duties, including notification of beneficiaries, determination of “net income” under the principal and income act, what is allowed and appropriate to distribute each year, properly managing trust assets, and filing tax returns.  The trustee should have legal advice during this process.  There are ways to minimize or limit a trustee’s personal liability through proper disclosure and consent, but the trustee must be proactive to get this protection.  Sometimes, the trust agreement needs to be modified to accommodate a change in circumstances, which is called a “trust modification”.   If allowed, these modifications can be done with the consent of all qualified beneficiaries in what is referred to as a “non-judicial modification” but sometimes a court order is required, called a “judicial modification.”  When administering a special needs trust, one should consider the adverse effects that making distributions may have on the eligibility for some government benefits the beneficiary may be entitled to receive.  Trustees should work with an experienced law firm to help them through this process.