Trust Administration in Texas: Challenges and Practices

Posted about 3 years ago. Applies to Texas, 0 helpful votes

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1

Why Use a Trust?

Trusts are not merely a means by which the wealthy might preserve generational dynasties. Today, even simple estate plans contemplate contingencies and specific objectives of the client that only trust planning can accomplish. The testator might seek to control assets well beyond his or her lifetime. Avoiding formal probate might be important, or the testator might plan for certain gifts based on specific objectives (e.g. college graduation). Or, the testator might proactively plan for a disabled dependant or the perpetually "irresponsible" beneficiary.

2

What Does a Trustee Actually Do?

If the Trust is a car, the Trustee is the driver. The vehicle may be fueled and the course plotted, but the journey won't begin until the Trustee hits the gas. Many clients may select their Trustee from any number of people. Family and friends are routinely used, but professionals, like attorneys, investment planners and even banks commonly take up the task. Each type of individual will bring his or her level of professional experience, anticipated fees, experience with trusts, and level of confidence by the client himself. Above all else, the Trustee's job is to carry out the terms of the Trust. When properly drafted, that document embodies the intent of the person that made it (the Settlor). The Trustee might bring this intent to reality in a number of ways -- by investing prudently, actively managing a business interest, or distributing property to beneficiaries after exercising the discretion to do so.

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What Duties Does the Trustee Owe?

In completing the job, the Trustee owes several duties, which may be enforced by the terms of the Trust and even under Order of the Court. Among the most important duties are the Trustee's (1) Duty of Reasonable Care (the duty to act with the same prudence and skill that the ordinary person would); (2) Duty of Loyalty (the duty to place the interests of the beneficiaries above his own); (3) Duty of Impartiality (the duty to treat all beneficiaries as equally as the Trust permits); and (4) Duty of Full Disclosure (the duty to adequately inform a beneficiary of any material facts that might impact that beneficiary's rights).

4

Can a Trustee Delegate Authority?

In all things, the buck stops with the Trustee. This does not mean, however, that every Trustee must become a master of professional practices to which he or she is not so accustomed. It is perfectly permissible, and more likely encouraged, to routinely utilize professional services and delegate some acts by doing so. For example, a Trustee might be well-advised to seek a competent attorney in order to guide the Trustee through his or her obligations. A Trustee might also seek the services of an investment professional, making sure to impose standards and benchmarks by which the Trustee can evaluate the planner's performance. An accountant might prove immeasurably useful when preparing any tax returns or dealing with any record-keeping issues.

Additional Resources

Law Office of J. Brian Thomas

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