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In Wisconsin, trust administration is the process in which the assets of a trust are dispensed, often this occurs when the grantor passes away. It is the responsibility of the trustee to take care of trust administration. The trustee secures the assets, pays off any debts, then distributes assets to the beneficiaries per the trust distribution guidelines.
Trust administration is the management and distribution of assets held in a trust. Trusts avoid probate, and therefore trust administration is carried out by a trustee named in the trust.
Trustees can be someone that the grantor (the person who created the trust) knows and trusts, or the grantor can hire a professional trustee to manage the trust. Whether a personal contact or a professional hire, all trustees have the fiduciary duty to act in the best interest of the beneficiaries of the trust.
To choose a trustee, consider the time and skills an individual has. Trust administration is a real time commitment. They will need to file taxes, sell or manage real estate, communicate with creditors and beneficiaries, and more. While a trustee is not expected to be an expert in all possible financial matters, a good trustee will have some basic competencies. There will be some level of financial literacy needed, and the ability to know when to hire a professional for help.
A trustee is responsible for the management and distribution of assets in a trust. For revocable trusts, the settlor can also be the trustee, up until the settlor is incapacitated or deceased. For irrevocable trusts, the settlor cannot also be the trustee. Trusts are private and not subject to court involvement typically.
An executor is named in a will, and responsible for carrying out the wishes of the deceased as outlined in the will. In Wisconsin, the majority estates are still subject to probate court, even with a will, with the exception of estates valued at less than $50,000. Often the Trustee and Executor are the same person.
Special administrators are named by the court in unique circumstances such as if there is no estate to be administered, but there are actions that need to be taken on behalf of the person that passed away.
The management of a trust’s assets begins as soon as the trust is created. The distribution of assets is often not until the person who created the trust (the settlor) is deceased. However, some trust assets could be distributed before the settlor’s death to reduce the taxable estate or for other reasons.
The trustee ensures compliance with the trust’s terms and state and federal laws. They have the responsibility to act in the best interest of the beneficiaries.
This fiduciary duty requires them to be loyal to the trust and the beneficiaries, treat all beneficiaries fairly and impartially, and manage the trust responsibly. Managing the trust responsibly includes making investments prudently and avoiding unnecessary risks.
It is also the trustee’s responsibility to communicate a reasonable amount of information to beneficiaries on the ongoing status and changes happening within the trust.
Trustees manage the trust for as long as the trust is active, and then they terminate the trust when the trust’s purpose has been fulfilled. This would entail distributing the remaining assets, paying final expenses and taxes, and providing any final accounting required.
They do not have to act alone. Many trustees consult attorneys, accountants, and financial advisors for help managing the trust. These expenses can be covered by the trust.
For all of this work, trustees can be compensated. Their compensation is often outlined in the trust and can be a fixed amount, an hourly rate, or a percentage of the trust’s value. The compensation is intended to reflect the time, effort, and expertise required to adequately manage the trust.
The trust administrator is bound by their fiduciary duty to the trust terms and the beneficiaries. Their role is to carry out the terms of the trust. The trust terms cannot be changed unilaterally by the trustee. They cannot take assets for themselves other than what they are entitled to if they are also a beneficiary or what is outlined as their compensation for their trust administration duties.
Trust administrators must manage the assets prudently. While they may make investment and financial decisions for the trust assets, they cannot take unnecessary risks, and their actions must be in line with the trust’s purpose and the beneficiaries’ best interests.
The specifics of what a trustee needs to do to manage a trust will depend on the assets within the trust. However, generally the following trust administration process steps will be required:
The trustee must know the inventory of all the assets within the trust. This includes everything from personal property to business interests, from bank accounts to real estate.
If there are valuable physical assets, such as collections or heirlooms, it is the trustee’s responsibility to ensure they are secured and protected from loss or damage.
The trustee has the legal obligation to keep the beneficiaries reasonably informed about how the trust’s assets are being managed. That obligation begins with notifying beneficiaries about the trust and the trustee’s role as soon as applicable–often at the trust’s creation or upon the settlor’s death. For ongoing trusts, the trustees also give regular updates on any changes to assets held within the trust.
Trustees must notify any creditors, ensure reported debts are valid, and use trust funds to pay debts and other necessary trust management expenses. Trustees do not blindly have to pay off any debts though. They are able to engage in debt reduction and challenge and claims of debts as is needed. Some non-debt expenses may include legal fees, accounting services, and trustee compensation.
Assets must be distributed according to the terms of the trust. This could be in lump-sum payments, based on milestones, or conditional. The trustee is responsible for ensuring distributions are in line with the purpose of the trust. They should also preserve the trust’s assets for future beneficiaries if applicable.
An attorney like those here at Grieve Civil Law can provide help and expertise when it comes to trust administration. They can help trustees with interpreting the trust and ensuring all aspects of trust management comply with local and federal laws.
Attorneys can be hired for trust administration in both contested and uncontested situations. It is also important to understand an attorney’s specialties when selecting one for your situation. A trustee may want to involve an attorney when:
To get help with and expert advice for administering trusts, contact an attorney at Grieve Civil Law.
