Trust administration involves multiple duties, all of which must be carefully followed by the trust's executor. In addition to distributing assets as outlined by the trust, the executor also serves as a fiduciary with duties owed to the beneficiaries.
Trusts are to distinguish between held assets and income produced from them. The trust's fiduciary has a responsibility to invest assets owned by the trust in order to produce income for the benefit of the trust beneficiaries. The investment activities must be prudent ones, and so executors without finance experience should consider seeking guidance from an investment professional.
The trust executor will also have duties owed to pay taxes each year. If the trust tax return is filed late, the executor may be personally liable for all penalties and fees owed due to the late filing. Each year, the trust executor must also send income tax statements to each beneficiary who received taxable distributions of income from the trust. Finally, investments that the fiduciary makes should be done in such a way that he or she minimizes the capital gains and income taxes that will be owed by the beneficiaries.
Trust and probate administration may be very complex, demanding that the designated executor or administrator have good investment, financial and organizational skills. He or she must also be highly ethical and keep abreast with changing laws regarding trust administration. When people are thinking about who to designate as an executor of their trust, they may want to discuss the decision with their estate planning attorney. An attorney may provide guidance regarding the wisdom of selecting an individual as the eventual fiduciary.