Do You Need a Trust Administration Attorney?
One of the most fundamental reasons why people choose to create a trust over a will is so that they can avoid the probate process. This can sometimes create the mistaken impression that the formation of a trust eliminates the need for legal representation. While you do not have to proceed through the probate court as you would with a will, legal representation is sometimes necessary when it comes to administering the trust. Whether you are considering creating a trust or have questions about administering a trust, a trust administration attorney can provide you with valuable guidance.
The Role of the Trustee
Before discussing whether you need a trust administration attorney, it may be helpful to review who the trustee is and what they do. In order to create a valid trust, you must name someone to serve as trustee. Similar to a personal representative named in a will, the trustee is responsible for administering the assets of the trust pursuant to the terms of the trust document. Administering the trust includes the following duties:
- Gathering trust assets and transferring ownership into the trust
- Keeping detailed records of all trust transactions
- Preparing and paying taxes
- Paying creditors
- Managing investments and other trust assets, including real property
- Distributing assets to the beneficiaries as directed by the trust
- Responding to requests for information from the beneficiaries
- Resolving conflicts among the beneficiaries
As you can see, this can entail a tremendous amount of work. More importantly, trustees are under legal obligations in the discharge of their duties. Referred to as their fiduciary duty, they must act in the best interests of the beneficiaries at all times. As a result, they could face potential legal liability in the event that they make a mistake or otherwise fall short in the discharge of their duties.
The Most Common Problem with Trustees
Given the potential legal exposure and the nature of the work involved in serving as trustee, you would think that settlors (the people who create a trust for their beneficiaries) would name someone with considerable financial and managerial experience to serve as trustee. Unfortunately, many settlors will name a friend or family member to serve as trustee, someone who rarely has the time or expertise to adequately perform their duties. Alternatively, the person they named as trustee may have been able to administer the trust when they were named but no longer have the time or energy to perform their role due to the passage of time. When the settlor dies, this can present a very challenging situation that can quickly deteriorate into potential litigation.
This is Where the Trust Administration Attorney Enters the Picture
A trust administration attorney can provide valuable assistance to the trustee in every aspect of their duties. As a lawyer, they will know the laws governing the administration of trusts and what trustees need to do in order to meet their fiduciary responsibilities. More specifically, an experienced trust administration attorney can help in the following ways:
- Review the trust agreement and explain what steps must be taken to ensure that you are performing all duties required by the trust document
- Prepare any necessary legal documents for the transfer of ownership of trust assets
- Identify and resolve potential issues such as conflicts of interest or improper influence from beneficiaries
- Ensure that you are meeting all legal requirements, such as record-keeping and filing taxes
- Handle any litigation that may arise with beneficiaries, creditors, or other entities
- Provide guidance as to trust investments and the “prudent investor standard”
- Advise as to how distributions must be made to beneficiaries in order to comply with the trust document
Hiring a trust administration attorney can protect you from unnecessary challenges and allegations that you have failed to meet your fiduciary obligations. These types of claims can quickly lead to expensive litigation that can significantly deplete trust assets. As a result, working with a trust administration attorney can be like purchasing insurance against litigation.
A trust administration attorney can also streamline the administration of the trust, which, in the long run, will reduce the expenses of administration. Your attorney can also help maximize the return on trust investments as well as minimize taxes and other liabilities. In short, a knowledgeable trust administration attorney can provide a value-added service that benefits not only the trustee but also the beneficiaries.
There Is a Cost to the Trust for Hiring a Lawyer
Of course, hiring a trust administration attorney will be an additional expense. Under Florida law, trustees are entitled to compensation that is “reasonable under the circumstances.” While the law does not provide any guidance as to what will be considered reasonable, most trustees charge fees that are based on a percentage of the value of trust assets, typically between 1% and 3%. The fee can be established by the trust agreement or by a separate agreement with the trustee. In the event of a dispute over the fee, the beneficiaries can challenge the attorney’s fee and have it reviewed by a court.
Can We Just Name the Lawyer Who Drafted Our Trust as Trustee?
Under Florida law, lawyers can serve as trustees. While this minimizes the need for additional services, keep in mind that a lawyer will not act as a trustee without compensation. This is no different than if you named a bank or other professional trust administrator to serve as trustee. It is also permissible to name the attorney who drafts the trust as a trustee. However, both the attorney and the settlor should be mindful of potential conflicts of interest, and it would be inappropriate for the lawyer to pressure the settlor into naming them as trustee.
Questions about Trust Administration? Contact Ellis Law Group Today
A trust is a powerful estate planning tool, but its value will not be fully realized if it is not properly administered. Ellis Law Group is a full-service estate planning law firm, and we can provide guidance on both the creation of your trust as well as administration of an existing trust. To discuss your estate planning needs, contact us today at 561-910-7500 to schedule a consultation.