Trust administration is a crucial task for many families, and it involves the management of assets held in a particular trust. Trust administration is particularly important when one considers the fact that grantors will not be around to oversee the assets they leave behind. Even before a grantor passes away, they may lose considerable control of an irrevocable trust once it is formed. This process involves tax planning, investments, communicating with beneficiaries, recordkeeping, and much more. Perhaps the most important role of a trust administrator is to closely follow instructions left behind by the grantor (the person who established the trust). How does this process unfold after a decedent passes away in Oklahoma? Who – or what – represents the most appropriate choice to oversee trust administration? Ultimately, the answers to these questions may depend heavily on the unique aspects of each family. Consider continuing this conversation alongside My Estate Advisor.
To understand the concept of trust administration, grantors must first understand the concept of a trust. A trust is an estate planning tool that allows transfers of assets to a separate legal entity. Once a grantor establishes a trust and transfers assets into that trust, they no longer own the assets. Instead, the trust owns the assets – and this can prove advantageous for a number of reasons. Perhaps most notably, the trust assets are not subject to probate.
Someone must be appointed to oversee the assets of the trust and follow the terms of the trust agreement. This person is a trustee – a mandatory component of each trust. The trustee shoulders considerable responsibilities – and they owe a “fiduciary duty” to the beneficiaries. The process of managing trust assets is called trust administration, and it becomes a major focus of the trustee. However, the trustee may need help from other individuals – especially when dealing with high-value, complex assets.
The process of managing trust assets is called trust administration, and it becomes a major focus of the trustee. However, the trustee may need help from other individuals – especially when dealing with high-value, complex assets. As a result, trust administration may be carried out by larger organizations rather than a single individual. These organizations may include companies such as banks or law firms.
A trust cannot manage itself. Even the most knowledgeable trustee may struggle to oversee every aspect of a trust, especially if it contains complex assets. Many grantors believe that they can simply choose a close family member as a trustee – perhaps a son who has experience in investment banking. However, that son often will need the help of a trust administration lawyer in Oklahoma – especially if this family member is busy with their own career and family life. A trust administration lawyer can come alongside the appointed trustee to assist with the administration and help the trustee navigate the challenges of trust administration. Financial knowledge is not the only requirement for this role, and the duties of a trustee can be both complex and varied. Trust administration becomes even more important with legacy trusts (also known as dynasty trusts). Oklahoma is one of a handful of states that allow perpetuities, which means a legacy trust could theoretically last forever in the Sooner State. If a grantor chooses a family member (or any other individual) as their trustee, what happens when they pass away? For a more long-term, stable solution, it makes sense to choose an organization rather than an individual. A third party trustee such as a bank or trust company can outlast the average adult, who may pass away within a few decades after taking on their role as trustee.
Asset management is a key priority in trust administration. Often, the first step is to determine the value of the trust assets – and this may not be immediately clear after the grantor passes. Real estate appraisers may contribute to this process, and various other illiquid assets may require careful assessment. Another key priority is to safeguard trust assets from potential threats. These threats might include divorcing spouses, debtors, poor investment choices, legal judgments, and many others. During trust administration, it may be necessary to sell certain trust assets. On the other hand, trust administration may also involve the purchase of assets – especially in regard to investing cash left behind by the decedent.
Trust administration may also involve the purchase of assets – especially in regard to investing cash left behind by the decedent.
A key concern in the modern era is inflation. Within a few decades, inflation can wipe out the value of assets held in a trust – particularly cash. Each year, prices rise further and further. Although the rise in prices varies depending on the year, the Bureau of Labor Statistics points to a significant overall increase over the past decade. Deflationary periods are rare. A key function of estate administration in the modern era is to maintain the value of trust assets despite inflationary risks. This may involve a careful balance between “safe” investments and higher-risk options. If an estate administrator fails to “beat inflation,” the actual value or “buying power” of the trust assets could decline.
Trustees must communicate with beneficiaries, keeping them informed about new developments and generally serving their best interests. This communication may be particularly extensive immediately after the decedent passes away, as the trustee may need to notify beneficiaries named in the trust. If beneficiaries have questions and concerns about the trust, they should be able to communicate with the trustee and receive relatively prompt replies.
Trust administration can be a complex subject, and online research may only provide basic information. Trustees in Oklahoma can seek assistance with their trust administration duties by continuing this conversation alongside My Estate Advisor – and they may develop a more complete understanding of this process during an initial consultation. The most appropriate estate plans are personalized based on the unique factors of each family, so contact My Estate Advisor today to continue this discussion.
