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Establishing your legacy through estate planning is one of the best things you can do for your family and planning on the disposition of your assets after your death is one of our fundamental rights as citizens. Trusts are powerful tools that can be used in place of or in addition to a Will and benefit you while you are alive. But, for a trust to work properly, a good, honest and trustworthy trustee must be chosen because service as a trustee is extremely difficult and that, if not done correctly, can expose the person chosen (and who accepts) to a lot of liability.
An experienced estate and trust disputes lawyer at Alvine Law Firm, LLP can help families navigate legal issues in Sioux Falls, Mitchell, and throughout South Dakota.
There are complex probate, fiduciary, and estate planning laws that will apply to your case. Avoid navigating these difficult times alone by contacting our legal team as soon as possible. Schedule your Free Consultation to find out more about your dispute or litigation options.
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Trust Administration: The Basics
To serve as a Trustee, a basic understanding of trust administration is required.
A trust is a separate legal entity that manages property like real estate, bonds, stock, cash, etc., for the benefit of named beneficiaries. A trustee is entrusted to manage the trust according to specific instructions in the trust agreement. There are three entities involved in a trust.
- Settlor(s)/Grantor(s): The person or persons that creates the trust and transfers assets into the trust. The grantor also sets the terms for the trust by outlining the assets in the trust and how they want them distributed
- Trust Agreement: The Trust Agreement is the “rule book” for how the trust is to be administered. It is the most important document in the Trust because it can alter the default provisions granting powers and authority as set by default in the South Dakota statutes; it is the reference for accepting new property, investing, making loans, distributing income and principal, establishing other trusts, merging separate trusts together and the like.
- Trustee(s): – The person or entity that holds, manages and administers the trust. The trustee acts on the grantor’s behalf, ensuring the terms set by the grantor are acted upon.
- Beneficiary or Beneficiaries: – Individuals who will receive the assets in the trust
Unlike wills, trust can go into effect when you’re alive—you do not have to die for your assets to be distributed. And upon your death, a living trust avoids probate, saving your beneficiaries time and money by avoiding probate expenses.
Trust administration is the process of the Trustee administering the trust property according to the Trust Agreement. In South Dakota, a successor trustee—often a friend or a family member of the person who sets up the trust—is granted the authority to act on the grantor’s behalf and becomes responsible for managing the assets in the trust.
When a trust is created and funded and the named trustee accepts the appointment, a formal fiduciary relationship is established. Every trustee is a fiduciary. All fiduciaries owe fiduciary duties to their principal and, in the case of a trust, a trustee owes fiduciary duties. If they breach these duties, they may be held liable for any loss incurred and possibly even removed from the trustee position.
Duty of Prudence
A trustee must be prudent with any action they take on behalf of the trust. When handling the investments in the trust, the trustee must exercise due diligence and care to ensure maximum returns on investment. Usually, this duty involves hiring a professional, such as an accountant or financial advisor, to help the trustee manage the client’s portfolio.
Duty of Loyalty
The trustee must be loyal to the beneficiaries and engage in activities that are in the beneficiaries’ best interest. The trustee cannot have any self-interest in the trust’s assets or make money from the trust or its assets other than the agreed-upon trustee fee.
Duty of Impartiality
The Trustee must be impartial to the beneficiaries during the administration, in performing his or her fiduciary obligations, distributing the trust assets, etc. They are supposed to treat each beneficiary fairly, not necessarily equally.
Duty Not to Delegate
The Trustee is required by law not to delegate the acts they are obliged to perform. Delegating defeats the duty of prudence and may be considered an act of negligence should anything go wrong due to delegation.
South Dakota Trust Administration
A short overview of some of the concerns of a Trustee in a trust administration is:
- The first rule of being a trustee is to follow the rule book, i.e., the Trust Agreement (see above).
- Following the dispositive or distribution provisions of the Trust to uphold the settlor’s/grantor’s intentions is of paramount importance.
- Fully disclosing all material information that affects a beneficiary’s interest, i.e., anything that occurs during the administration.
- Preserving and protecting the Trust assets.
- Making proper administrative decisions within his or her fiduciary duties and obligations such as:
- whether to sell or keep it;
- recognizing income and principal and properly paying bills from each;
- investing its properly prudently.
- Filing federal tax returns.
Alvine Law Firm, LLP can help ensure your family’s trust and its assets are properly managed according to its trust terms.
How Alvine Law Firm Can Help You
Being a Trustee (fiduciary) is often a thankless job, but, if accepted, it must be done correctly and navigating the hurdles of being a trustee and perform all fiduciary obligations can be daunting. To be a Trustee, you are going to need an experienced attorney who possesses a deep understanding of trust administration law in South Dakota to provide trust administration guidance during a complicated process. We help trustees navigate every aspect of the trust administration process, including interpreting trust provisions, contesting trusts, and advising our clients on the issues that may arise in the process. At Alvine Law Firm, LLP representing you, you’ll become a part of our team as we help you conduct your trustee duties and responsibilities as per South Dakota law.
For more information on how to administer a trust, call us at (605) 275-0808 or schedule a free consultation.
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