Being the successor trustee can be an overwhelming job. You’ve read the trust, and managed to translate it from ancient Akkadian into something resembling English. You have tax returns to file, property to organize, inventory, and manage, and beneficiaries clamoring for their money. If you’re lucky, that’s all their clamoring for. Here are 5 tips to keep the job manageable and keep you out of trouble.
Start with the inventory
The first step is to take an inventory of everything that existed when you took over as successor trustee. Typically, that is the date of death. List everything with value, real, perceived, or emotional value. Give that list to all the beneficiaries with a copy of the trust. Update and correct the list as necessary.
Keep a Current Accounting
You need to track all changes during the time you’re in charge. Any money coming in, any money going out has to go into the ledger. At the end of the day, everything should balance, and the beneficiaries, their attorneys, and the court should be able to clearly see what happened to the money. Never put the trust money in your personal account! Set up a separate account using a TIN for the estate (ask your accountant if you need help with this, or your attorney will obtain one for you). Have a place to write down every transaction when it happens, and keep it current – don’t wait for the end to try and recollect everything that happened.
Distribution (i.e., read and following instructions)
It is vital to follow the instructions in the trust or will completely. You’ll want to start planning the distribution as quickly as possible. What discretion do you have? What tasks are you required to carry out? Failure to follow the instructions in the will or trust leave you open to personal liability (meaning you could be sued and have to pay losses out of your own pocket). Remember that beneficiaries have legal rights and are protected under the law. As the successor trustee you owe them a duty of care.
Management
Sometimes assets can be distributed right away, but not always. You may need to wait for final medical bills to come in, or other expenses. It takes time to put a property on the market. Sometimes, distributing the asset right away may not make sense. The market may be very low, or all the parties decide to improve the property. In any case where an asset is going to be kept in the trust for an extended period of time additional issues arise. If it’s a house, who will pay the ongoing expenses? Will one beneficiary live in the house for a period of time? Dealing with these questions at the outset saves time and headaches down the road.
Communication
The biggest complaint I hear all the time from beneficiaries, is that they have no idea what is going on. Not knowing what is going on makes them nervous, suspicious, and apt to do things to make your life more difficult. By following the steps above, and keeping the beneficiaries in the loop (even if they are still a pain) you can eliminate a large percentage of the trouble successor trustees get themselves into.