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A creator or grantor of a normal revocable living trust usually serves as the trustee of a trust until their incapacity or death. After one of those events, a successor trustee takes over the trust to manage and administer the trust assets. Some trust creators have two children or have two people they trust enough to make them successor co-trustees of their trust, which puts two people in charge of the trust simultaneously. This can create problems if the co-trustee duties are not clearly spelled out.
One common problem associated with co-trustees is if the two trustees have to act jointly with each other, meaning they need to sign deeds, checks, and other financial documents together. This can slow down the process, especially if one or both trustees do not live near one another or are not communicating with each other. This can also slow down or cause problems when one trustee goes out of town for vacation, is incapacitated, etc. A well written trust agreement should provide for replacement of a co-trustee who cannot serve for some reason, or state that the remaining co-trustee can act alone in this scenario.
Another common problem with co-trustees is what happens if there is a disagreement between them about the administration of the trust. It is amazing how many problems and family strife can occur when the matriarch or patriarch of the family passes away. If co-trustees do not trust one anther, do not get along, or just do not agree with the decision of the other co-trustee, it may require court intervention to break the disagreement. For example, if one trustee wants to sell some property and distribute cash and a co-trustee wants to retain the property, there is a stalemate. If there are three co-trustees, the majority prevails, so an odd number of co-trustees are not such an issue in regards to disagreement. However, if co-trustees are assigned equal authority and responsibility in the trust agreement, some third-party intervention will be needed, and that can get costly.
A common way to avoid common co-trustee problems is to name a trust administrating institution, like a bank or trust company, as the principal trustee, with children or other beneficiaries as co-trustees. That essentially places control of trust with an independent third party, who can be an mediator if the co-trustees cannot agree. Another way is to just name one sole trustee, like your oldest or most responsible child or friend.
One of the best ways to avoid this problem is to talk to a qualified estate planning attorney who can help solve problems like this. Consider getting your estate planning done by the attorney at the Skillern Law Firm. She can help make sure your estate plan is well written and will not problems in the future that can be easily avoided.
Many people who create a Revocable Living Trust fail to understand what happens to the trust after they are gone (for more information about types of trusts, see Let’s Talk Trusts). One of the most common misconceptions is what happens to a Revocable Living Trust after the trustmaker or “trustor,” or the person who created and funded the trust, dies. A lot of successor trustees believe, that as long as the trust is fully funded, all that they need to do is collect an inheritance check, pay some taxes, and that is it. However, it really does not take a lot of common sense to figure out that there needs to be more than that, since you are closing and cleaning up the financial affairs of a person’s entire life. (For more on trustee’s duties, See Duties of A Trustee).
Even though probate is not required for a correctly and fully funded trust, the successor trustee of the trust will still have quite a few responsibilities and duties to accomplish before the trust’s beneficiaries can receive their inheritance. Usually, there are taxes to be filed and paid, bills to be paid, paying ongoing expenses of maintaining the real estate of the trust, and selling or auctioning off any property that cannot be liquidated any other way. However much work this seems, this is much better than having a court process where a judge is looking over every bill to be paid, every expense, and holding things up due to court dates needing to be scheduled. Usually the only professionals needed in this process is a good accountant, and sometimes an attorney. Cleaning up and closing a trust is still much faster and cheaper than probate.
If you are interested in getting a trust, or finding out more about how one can help you and your heirs, please call our office today.
When creating any type of trust, the creator of the trust (called a “trustor” or “settlor”) needs to nominate someone or an organization to be their trustee. Usually the Trustor nominates himself or his spouse to be the original trustees, but some may nominate their bank, attorney, financial planner or children to be a trustee. Many people do not know what is involved in managing a trust as a trustee or successor trustee. Many people view being nominated as a trustee as a showing of confidence and judgement of their abilities, which is very true. However, it is also a major responsibility. Today on the Tulsa Estate Planning Blog, the offices of the Skillern Law Firm will help you realize the duties of a trustee.
- Duty to Administer the Trust by Its Own Terms. The trustee has a duty to administer the trust, as well as manage the trust assets, in a way that follows the exact terms of the trust agreement/document. The trustee needs to follow the terms of the trust as they are written on the document’s face, without trying to interpret the language. If there needs to be interpretation, then the trustee should use their best judgment or seek out legal advice on how to correctly follow the terms of the trust. No deviation is allows from clear and concise language of the trust, unless a court of law has shown them to be against public policy.
- Fiduciary Duties & Responsibility. A trustee has a “fiduciary” duty to the beneficiaries of the trust. The beneficiaries include current or “remainderman” beneficiaries (like grandchildren that may inherit if their parents pass away). As a fiduciary, the trustee shall be held to a high standard. This means that the trustee must pay closer attention to the trust investments and disbursements than you would for your own accounts.
- Investment Standards: When acting a trustee, the investments you make cannot place the trust’s assets in speculative or risky investments. In addition, as stated similarly above, the investments must be made with the beneficiaries and contingent beneficiaries in mind. As trustee, you may need to balance the benefits of many types of investments, since some may benefit certain types of beneficiaries more than others. For example, some beneficiaries may need some long-term investments as compared to others, who will not be depending on the income as much. All of these questions, and more, need to be considered when deciding on an investment scheme for the trust.
- Distributions. Many trusts give the trustee complete discretion when it comes to hanging out distributions of the trust assets to the trustee. The trustee needs to decide when to hand out distributions, based on the beneficiary’s needs, his/her future needs, and their other sources of income. The trustee must also look at the total amount of trust assets and what would be the best way to hand out distributions based on the total amount of beneficiaries. Many times, beneficiaries will repeatedly ask the trustee for a distribution, and the trustee must have the discretion to say “no” when it would not benefit the trust or the trustee.
- Accounting. One of the most important jobs of a trustee is to keep track of all income, distributions, expenditures, and general accounting of the trust estate. Most trusts, including the ones created by the Skillern Law Firm, include provisions in the trust document that makes it to where the trustee must give the beneficiaries of the trust an accounting at least once a year. Many trustees hire qualified CPA’s for this duty, and the trust most likely has the ability to pay for those services.
- Taxes.Another duty of a Trustee that needs a qualified CPA is paying the Trust taxes. Depending on the type of trust created and being handled by the Trustee, the trustee will need to file an annual tax return in the trust’s name, and may need to pay income or trust taxes. A trustee will need to keep accurate records and keep a qualified CPA on hand to handle this duty well.
- Delegation. As you can probably already tell, a Trustee will need to have great delegation skills to be able to maintain and manage the trust assets. This includes hiring an attorney, qualified CPA, financial adviser, or any other professional needed. The duties of a trustee can be much better handled with the help of professionals, and the offices of the Skillern Law Firm recommends using professionals when making any important decisions about the trust. Communication is also very important when you delegate, so you and your professional knows what the goal of the trust, and how that can be best handled.
- Fees and Expenses. In Oklahoma, Trustees are entitled to a statutory fee that is considered “reasonable.” Usually family members and friends do not accept fees, but they may and can request such fee. Professionals will charge a fee, and those can be paid from the trust estate. Trustees can decide what professionals to pick, and can base their decision based on the expense, however, price is not always the best choice.
Acting as a trustee or successor trustee for a Living Trust is a great opportunity to help a friend and/or family member, and can build some great relationships. The work is hard, but it is manageable, especially when using professionals to help manage the trust. Being a trustee is a wonderful opportunity to grow, but please be aware that it is not a job to be taken lightly.
If you are a trustee of a trust or are interested in creating a trust, call the offices of the Skillern Law Firm, PLLC today.
There is a popular trend among the states right now in estate planning law to allow people to make preparations for their pets in their will or trusts. Oklahoma has recently joined the trend. Oklahoma now allows pet trusts since a relatively recent House Bill1641 that was signed into law and became effective August 27, 2010. If you want to read the statute in its entirety, click here.
A brief description of the law is essentially that the law has created a new section of the Oklahoma trust code that now legalizes trusts for the care of pets. The pet trust is terminated when there is no more living pets under the trust, so you can have a pet trust for more than one pet and it will exist until all the pets are deceased. The statute then gives a description of what the rules for governing a pet trusts, including compensation for the trustee, accounting requirements and provisions for terminating the trust. You can pick the trustee or pet caretaker, and trustees can be provided with compensation for administering the pet trust.
The code also states that the “The trustee may employ agents or contractors to provide any care and pay for the care from the assets of the trust. The trustee shall also ensure that the property of a trust authorized by this section is applied only to its intended use.”
The Oklahoma statute states that if you trust is below $20,000, the trust is exempt from fees, unless a court says otherwise. If the trust has a value of $20,000 or more, you will have to pay fees that include filing fees, periodic accounting, separate maintenance funds, and registration fees.
In the pet trusts, you can have complete control over your pet’s future needs, including their food, schedules, and even their veterinarian. The trust will be like most trusts: revocable, so you can make it go away or amend it at any time. You can make the trust be activated if you become disabled or incapacitated, which a will cannot do.
Overall, it is a good step forward in the area of pet estate planning.