Getting started as a trustee means familiarizing yourself with your new responsibilities. Carrying out these responsibilities throughout the trust administration is the key to reducing your risk of serving as a trustee.
In Florida, a trustee is governed by the terms of the trust agreement, the provisions of Florida law, and the provisions of federal law (particularly in the area of taxation). The provisions of these laws are quite specific, and the terms of each trust are quite different. The following summary is a general overview of the elements of service as a responsible trustee, but it should not serve as a substitute for a thorough analysis of the steps a trustee should take in administering a trust.
If you are named as trustee of a trust, what follows are suggestions for responsible service as trustee.
First, consider whether this is a responsibility you wish to undertake. A nominated trustee is not obligated to accept the trusteeship. Your relationship with the person making the nomination is important, as is your relationship with the individuals and charities who are beneficiaries of the trust.
Obtain a copy of the trust instrument and read it thoroughly. If you are unsure about the terms, obtain advice from a competent source explaining the terms of the trust and how it is intended to be administered. A summary of the major provisions of the trust provided by this advisor can serve as a useful guide.
Take immediate steps to identify the assets held in the trust. Determine whether these assets need to be secured; for example, if there is a home or building held as a trust asset, determine whether it is vacant or occupied. Gather leases and copies of other contracts to which the trust is bound. Determine where investments are located and by whom they are being managed. Identify insurance needs and locate records showing the amount of coverage. The list of steps to be taken with regard to trust assets is lengthy, and each asset requires a particular type of examination by the trustee.
Identify the beneficiaries of the trust. Florida law requires that a trustee taking office notify the beneficiaries of the trust and provide certain information to them at the beginning of the trusteeship and on an ongoing basis throughout the trust administration. The provision of appropriate and timely information to the correct group of beneficiaries is one of the best ways to reduce your exposure to risk.
Locate the records of the trust, and keep good records going forward. Reviewing past income tax returns, notices to the beneficiaries, records of trust investments, and the like will enable you to continue the administration of the trust with adequate knowledge of what has gone before. Keeping good records will help to protect you going forward. If there is an audit by the IRS or a question or issue raised by the beneficiaries, having all records at hand will place you in a much better position to respond in a timely and correct manner.
Engage professional advisors to represent you in the trust administration. Engaging an attorney or law firm experienced in representing trustees will enable you to better understand the responsibilities of serving in this role and guide you in fulfilling these. In addition, it will minimize your exposure to risk in the administration process if you understand and fulfill your duties in reliance on competent advice. If the trust contains investments, for example, consider whether the appropriate investment advisor is in place. An accountant experienced in the preparation and filing of trust income tax returns and accountings to the beneficiaries should be retained. If there are specialized assets, such as environmentally compromised properties, consider whether environmental engineers should be engaged to determine the condition of the property and the necessity for remediation.
By taking these steps, you are on your way to responsible service as a trustee in the manner worthy of the person who placed such confidence in you.