by Jeanne Wiener, CPA/PFS
One of the most important decisions a person can make is determining who will manage their personal and financial matters when they pass away. When you are asked if you will accept this role for someone, you might be honored, even flattered to be chosen by the trust grantor. You might think, “How hard could this be?”.
The truth is that trusteeship can be straightforward, or it can be full of unknown pitfalls and challenges. As trustee, you could become overwhelmed or unknowingly make missteps during administration. Trusteeship can be very stressful and carries with it responsibilities and even potential liabilities. It is important to know what the role of a trustee really entails and to know in advance which issues could be problematic.
The Role of Trustee
In general, a trustee is tasked with gathering information about all the assets and liabilities of the decedent. Accounts are transferred into the name of the trust and into the control of the trustee. The trust remains open until all the assets have been accounted for, all the liabilities have been paid, and any remaining assets have been distributed according to the trust document. The final tax filing for the decedent and any tax filings for the trust are also the responsibility of the trustee. However, this process can be complicated by a number of factors. A partial list includes:
- Feuding beneficiaries
- Incomplete or outdated estate planning documents
- Widely varying documentation requirements of financial institutions
- Assets not properly titled to the trust, possibly creating a requirement for probate proceedings
- Assets in other states which may require separate probate proceedings
- Tax filing requirements, particularly in other states
- Assets which are hard for the trust to sell or transfer (i.e. oil rights, closely held partnership interests)
- Undocumented assets
Mitigating Potential Problems
Given all of the potential challenges one could face as a trustee, what can be done to mitigate any potential problems?
First, get a copy of the estate planning documents that will list you as executor and/or trustee and review them before agreeing to serve. If you have any concerns, discuss them with the grantor now. If possible, discuss beneficiary dynamics so that you know what issues may come up.
Second, request the contact information for the grantor’s attorney and tax preparer. Whether or not they assist with the administration, you may need to contact them for copies of documents or for clarification of information.
Third, get a current asset and liability inventory from the trust grantor. This list will likely change over time, but it’s a great starting point for tracking down information and transferring title to the trust. It gives you a chance to remind the grantor that assets should be correctly titled to ensure smooth administration.
Finally, above all, document everything. At the moment you begin your role as trustee, keep a log of your tasks and calls. Keep detailed records of receipts and disbursements in case a formal accounting needs to be prepared.
Keys to Success
In summary, people often agree to be a trustee due to family loyalty or friendship. Many do not realize that the position carries with it a great deal of responsibility and possibly significant stress. The trustee must wear many hats—Referee, Bookkeeper, Detective, Administrator, and Financial Manager. The most important thing a trustee or potential trustee can do is be well-informed.
There are concrete steps that can be taken to minimize wrong turns and administrative headaches. Every trust administration is different, but a trusteeship can be successful with planning, patience, and perseverance.
For more information about issues discussed in this article, or for assistance with your estate and trust needs, you may reach us by contacting email@wheelercpa.com and following along on social media.
Jeanne joined Wheeler Accountants, LLP, as a Principle in June 2021, specializing in estate and trust tax preparation and planning as well as individual tax preparation and financial planning. Jeanne enjoys assisting clients in their roles as executor or trustee as they work their way through the administration process.