Trust Administration involves overseeing the assets held within a trust. A trust is a form of legal property ownership in which an ownership interest in real or personal property is split. Trusts are commonly created as an estate planning tool, and the trust administrator (the trustee) then oversees the distribution of assets within the trust according to the wishes of its creator.
When a trust is created, in addition to naming the beneficiary or the person who is entitled to use the trust assets, a trustee must also be named. That trustee is responsible for trust administration. This means he is responsible for protecting the assets in the trust and ensuring they are used according to the wishes of the individual who established the trust.
The duties involved in trust administration vary depending on the nature of the trust created. It is common, for example, for a person to create a trust in which money is left to a child and then distributed to that child to pay educational expenses or when the child reaches a certain milestone. In such a situation, the trust administration duties involve ensuring that the assets are protected until the child reaches maturity and/or ensuring the money in the trust is used only for qualified educational expenses.
The trustee has a fiduciary duty when performing the trust administration. This means the trustee owes the highest obligation to protect the assets in the trust and the interests of the beneficiaries. The trustee cannot divert assets from the trust into his or her own name, put the assets at risk in any way or otherwise behave in such a manner that interferes with the purpose of the trust as determined by the trust’s creator.
Although not required, we recommend in many situations that the trust creator consider utilizing a professional trustee instead of a layperson as trustee. An example of a professional trustee is a trust company or a lawyer who has experience in this area of the law, so that the trust will be properly managed. Trust Companies offer an all in one professional experience; they operate the trust as an administrator and also invest the assets of the trust. However, some clients prefer that the trust assets remain invested with their financial advisor, which will generally preclude a trust company from acting as trustee. One option is to use a professional trustee such as a lawyer and direct within the trust document that your investment advisor shall invest the funds of the trust. This is a called a directed trust.
Attorneys Michael L Wood and Patience E. Morrow provide Trust Administration services for clients in New Hampshire that prefer utilizing an experienced professional trustee instead of a trust company or layperson (such as a family member).