Although a trust is a very important estate planning technique because of its usefulness in reducing or eliminating taxes and avoiding probate, administering a trust can be a challenge. Nevertheless, the benefits of a trust cannot be overlooked. Understanding the basics of trust administration can be helpful if you are ever called upon to serve as a trustee. Let our trust attorneys explain the basics.
What is the legal definition of a trust?
A trust is basically a fiduciary agreement between the trustor and the trustee. The trustor is the person who creates the trust. An agreement that is based on trust and confidence is known as a fiduciary agreement. The purpose of the trust agreement, then, is to give the trustee the necessary authority to manage the trust property and distribute them to the named beneficiaries as instructed. A trust can either be used in place of a will or in conjunction with one.
The common objectives of a trust
An estate has many components including, not only financial wealth, but also retirement accounts, investments, and various types of property. When a trust is drafted correctly, you can transfer your estate assets to a trustee so you can accomplish a wide variety of estate planning goals, including:
- protecting assets and ensuring their distribution according to your wishes
- protecting your estate from significant taxation and transfer fees
- managing your affairs in the event of incapacity
- facilitating charitable giving
What is involved in trust administration in Missouri?
Each trust needs to be administered by a trustee, regardless of the specific goals of the trust. Trust administration requires many things, such as managing investments, implementing charitable giving strategies, risk management, insurance planning and business succession planning. The trustee you select to manage your trust and its administration must be held accountable for carrying out the specific instructions you include in your trust.
Using trust attorneys as trustees
When you are searching for a trusted individual to provide fiduciary services, trust attorneys are generally a good choice. First, attorneys possess specialized skills and training which can certainly prove valuable when it comes to trust administration. Second, the trust attorneys who draft the trust documents will already be particularly familiar with your circumstances, including your financial matters. Even if your attorney does not have substantial experience managing investments, he or she can gather the additional information or education needed or to hire an expert to provide the necessary services.
Are there any ethical considerations when hiring trust attorneys as trustees?
In most cases, there aren’t any ethical concerns that should generally preclude an attorney from serving as a client’s trustee. However, as with any fiduciary relationship, there are some considerations that must be addressed. Basically, your attorney is simply required to make disclosures to you so that you, as the client, can give informed consent to the relationship. Your attorney should also give you assurances that there will be no conflicts of interest that would otherwise prevent him or her from managing the trust.
Trust attorneys are required to exercise professional judgment
When an attorney creates a trust for a client, they will discuss the client’s alternatives for selecting a trustee. When the trust is created, the attorney is allowed to inform the client of the availability to serve as trustee. The only catch is that the attorney cannot allow self-interest to interfere in any way with the duty to suggest the best choice of fiduciary. The attorney is also required to refrain from violating any ethical rules regarding solicitation of clients or entering into business relationships with a client. These particular rules are established and enforced by the state bar where the attorney practices law.
Other considerations in trust administration
When a client proposes that his or her attorney serves as the trustee, there are usually no ethical issues that will arise. This is true with regard to the rules on solicitation of clients and providing independent legal advice. Still, many clients are unaware of their lawyer’s ability to serve as their trustee. Therefore, in most cases, the attorney will simply inform his or her client of this option but must say nothing more that would impact the client’s decision. The fact that most clients will inherently be influenced by the fact that an attorney-client relationship already exists, in itself is not sufficient to create any ethical dilemmas.
If you have questions regarding trusts, trust administration, or any other estate planning matters, please contact the experienced attorneys at Gaughan & Connealy for a consultation. You can contact us either online or by calling us at (913) 262-2000. We are here to help!