What does a trustee do, anyway?
Many people choose to set up trusts as part of the estate planning process. The reasons vary, but it may be for tax planning, due to worries about how a beneficiary will handle a windfall (a topic for another day), or to provide for future and potentially unknown generations. Whatever the impetus, when setting up a trust, one of the most important decisions to make is who will be in charge.
Say you’ve been named trustee , or you’re wondering who to select as a trustee - it’s an honor, to be sure, but what exactly does a trustee do? A lot more than most people think, and with three areas of focus:
Investment - The trustee has a duty to the beneficiaries (the folks who receive funds from, or can use property of, the trust) to invest the trust property wisely and receive a market rate of return. For many people who are not finance whizzes, this is a tall order, and a trustee may choose to hire am investment professional.
Administration - At the outset, the trustee must inventory the trust assets, expenses, etc. As the trust portfolio changes over time, the trust terms will likely require trustee reports to the beneficiaries. The trustee must also respond to beneficiary questions in a timely manner. One of the most important administration duties is that trusts generating any gross income over $600 must also file an annual income tax return.
Distribution - Trusts may require distributions at certain life milestones - i.e. reaching 35 years of age, graduating from college, etc., or they may allow for discretionary distributions. A trustee must be careful to document every distribution and reasons therefore to avoid rancor, or worse, down the road.
If you are wondering whether a trust is right for you as part of your estate planning, visit us at www.levinelawma.com.