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What is trust administration?

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What is Trust Administration?

What is Trust Administration?

Trust Administration

What is trust administration? Trust administration is the process of managing and distributing the assets of a trust. When a person creates a revocable living trust and passes, that trust typically becomes irrevocable and enters a phase requiring trust administration so that the assets held in the trust can be distributed to the beneficiaries of the trust. The creator of the living trust, usually referred to as a trustor, settlor or grantor; transfers ownership of their assets to the trust. Typically while the trustor is alive, they also act as the the trustee (the person managing the trust) but designate a successor trustee (the person or people who will administer the trust when they pass or if they become incapacitated) in the trust documents. The successor trustee is responsible for carrying out the terms of the trust and managing the trust assets according to the instructions set forth in the trust document by the trustor. In the process of trust administration, the trustee has a number of duties. Common trust administration duties include:

  • Paying the expenses and debts of the trust
  • Managing the trust assets in a way that is consistent with the terms of the trust
  • Managing any investments held by the trust
  • Maintaining accurate records of all trust transactions
  • Filing any necessary tax returns on behalf of the trust
  • Distributing the trust assets to the beneficiaries according to the terms of the trust
  • Providing accountings to the beneficiaries as required by law or as specified in the language of the trust document

In some cases the administration of a trust can be complicated as well as time-consuming and a professional such as an attorney or trust administration company may be hired to handle or assist with the trust administration. Factors such as the number of beneficiaries, types of assets held in the trust, quantity of assets or the complexity of the trust accounting and taxes may all be considered when deciding if a professional trust administrator should be utilized.

What is a Fiduciary?

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What is a fiduciary?

What is a fiduciary?

A fiduciary is a person (or group of people) entrusted with the responsibility of acting in the best interests of another person or organization. In a fiduciary relationship, the fiduciary has an ethical responsibility to act solely in the interest of the person, client or organization that they represent as opposed to their own interests or the interests of a third party.

Here are some common examples of fiduciaries:

  • An Estate Executor
  • A Trustee or Trust Administrator
  • Healthcare Representative
  • A Guardian
  • A person granted a Power of Attorney
  • A Lawyer
  • Conservator for those who are mentally or physically incapacitated
  • Certain financial advisors
  • Professional Fiduciary

The individual or organization that is named as the successor trustee is a fiduciary acting on behalf of the trust, the assets contained in the trust and in the interest of the beneficiaries of the trust. As a fiduciary, the trustee is obligated to make decisions that are in the best interest of the beneficiaries and abide by the language of the trust.

A fiduciary is often appointed to manage the assets or financial affairs of another person or organization. In these situation a fiduciary has a duty to manage the assets in a way that is in the best interests of the person or organization they are representing. Their actions should be completely free of self-interests. The fiduciary is expected to act with care, diligence, and in good faith. A person designated in an Advance Healthcare Directive to make the healthcare decisions on behalf of another person who has become incapacitated or is unable to make decisions for themselves is also considered a fiduciary. In these cases, the fiduciary has a legal or ethical obligation to act in the best interests of the person they represent.

Professional Fiduciaries practicing in the state of California are required to be licensed by the Professional Fiduciaries Bureau under the California Department of Consumer Affairs. Professional Fiduciaries sometimes have had previous careers working as attorneys, CPA’s, or social workers. The primary association that represents fiduciaries in California is the PROFESSIONAL FIDUCIARY ASSOCIATION OF CALIFORNIA.

According to the Professional Fiduciary Association of California, Professional Fiduciaries can have a wide variety of specialties including:

Accountant/Bookkeeping ⁃ Accountant/CPA ⁃ Appraisal Services ⁃ Arbitrator ⁃
Asset Management Services ⁃ Attorney ⁃ Bankruptcy Administration ⁃ Bill Payment  Services ⁃ Bio Hazard Removal ⁃ Care Management ⁃ Case Management ⁃ Charitable Remainder Trust ⁃ Conservatorship of Estate ⁃ Conservatorship of the Person ⁃ Consultant Services ⁃ Copyrights ⁃ Court Approved Accounting ⁃ Daily Money Manager ⁃ Diversified Personal Services ⁃ Enrolled Agent ⁃ Estate Administration (Probate) ⁃ Expert Witness ⁃ Family Consultant ⁃ Fiduciary Accounting ⁃ Financial Advisor ⁃ Fraud Investigation ⁃ Guardian Ad Litem ⁃ Guardianship ⁃ Hospice ⁃ In Home Care ⁃ In Home Care Placement ⁃ Informal Assistance ⁃ Insurance Trust Administration ⁃ Insurance ⁃ Insurance/Bonding ⁃ Intellectual Property ⁃ Irrevocable Trust Loans ⁃ Limited Conservatorships ⁃ Mental Health Services ⁃ Mortgage Services ⁃ Personal Financial Management ⁃ Physician ⁃ Power of Attorney ⁃ Probate Administrator ⁃ Probate Referee ⁃ Professional Mediator ⁃ Real Estate Finance ⁃ Real Estate Investment ⁃ Realtor ⁃ Receiver ⁃ Representative Payee ⁃ Reverse Mortgage ⁃ Special Needs Trust Administration ⁃ Tax Specialist ⁃ Title/Escrow ⁃ Trust Accounting ⁃ Trust Administration ⁃ Trust Litigation ⁃ VA & SS Payee ⁃ Wealth Management Planning

How much does a fiduciary charge?

Not all people acting as a fiduciary charge fees and the fees that a professional fiduciary charges can vary widely. The fees that a fiduciary charges depends on the specific services they provide, the area they practice, their level of experience and the complexity of the matter they are handling.

Some fiduciaries, such as trustees or guardians, may be appointed by a court / probate court and may not charge a fee for their services. In other cases, a fiduciary may charge a fee for their services which can be based on a fixed rate, an hourly rate, or a percentage of the assets they manage. For example, a financial advisor who serves as a fiduciary for their client may charge a percentage of the assets they manage. This type of payment structure is commonly referred to as an “asset-based fee.” This fee can range from a fraction of a percent to several percent. A lawyer or trust administrator who serves as a fiduciary for a trust or estate will typically charge an hourly rate for their services. Depending on the scope of the work to be conducted, they may also offer a flat fee to completing specific tasks. It is wise to discuss the fees with the fiduciary in advance and to have a clear understanding of the work they will be performing and will not performing.

How do you become a fiduciary?

In general, becoming a fiduciary involves demonstrating trustworthiness, honesty, integrity, and a desire to act in the best interests of others. The following are just a few examples of how you might become a fiduciary:

  • Trustee: You can become a trustee by being named in a living trust document. In these roles, you would be responsible for managing the assets of the trust and distributing them according to the terms of the trust.
  • Executor: You can become the executor of an estate by being named as such in a persons will or last will and testament. In these roles, you would be responsible for managing the assets of the estate or trust and distributing them according to the terms of the document.
  • Financial Advisor: You can become a financial advisor and act as a fiduciary for your clients. The licenses and certifications for becoming a financial advisor include a Series 7 (General Securities Representative Qualification Examination) or Series 65 (Uniform Investment Adviser Law Examination). As a financial advisor, you would be responsible for assisting clients in making financial decisions and managing their assets in a way that is in their best interests.
  • Guardian: You can become a guardian by being appointed by a court to manage the financial affairs or personal care of a minor, incapacitated adult or person with special needs.
  • Attorney: You can become an attorney by completing law school (in some states, such as California, a 4 year degree from a law school is not required) and passing the bar exam in a state. As an attorney, you may serve as a fiduciary in certain contexts.

Regardless of the specific role, becoming a fiduciary often requires a commitment to ongoing professional development and adherence to ethical standards. It is important to note that the specific requirements for becoming a fiduciary can vary depending on the state in which you live and the specific responsibilities of the role. It is a good idea to research the requirements in your area and to seek the guidance of a professional, such as an attorney if you have questions.