Trust Administration

A trust is a legal arrangement where property is managed by one party for the benefit of another. Although there are many types of trusts designed for specific goals, all trusts share certain key components, including:

1. 1. Creator: Also known as the Grantor, Settlor, or Trustor, this is the person who establishes the trust.
   2. Trustee: The person or entity appointed by the Creator to manage the trust, invest its assets, and distribute those assets to the beneficiaries.
   3. Beneficiary: The individual, group, charity, or even pet that benefits from the trust’s assets. There may be multiple beneficiaries, both current and future.
   4. Terms: The guidelines set by the Creator in the trust document, which must not involve anything illegal or impossible.
   5. Funding: The assets transferred to the trust, such as cash, real estate, or securities.

It is not unusual to have the Trustor, Trustee, and Beneficiary all be the same person or persons, such as a husband and wife.

Trusts fall into two broad categories: living trusts and testamentary trusts. A living trust is established and managed during the Creator’s lifetime, while a testamentary trust is created through provisions in a Last Will and Testament and only comes into effect after the Creator’s death.

A revocable trust allows the Creator to modify or revoke it at any time, whereas an irrevocable trust cannot be changed or undone once created. Living trusts may be either revocable or irrevocable. Testamentary trusts, on the other hand, are irrevocable once they come into effect. Although an irrevocable trust cannot be altered by the Creator, a court—or in some cases the Trustee or beneficiaries—may be able to revoke it under specific circumstances.

A Trustee’s responsibilities during trust administration vary but typically include:

• • Understanding and complying with the terms of the trust.
  • Communicating with beneficiaries.
  • Managing and investing trust assets.
  • Keeping detailed financial records.
  • Filing taxes for the trust.
  • Distributing assets to beneficiaries as specified in the trust agreement.

Yes. Trustees are entitled to reasonable compensation for their services. The trust document may specify how much the Trustee should be paid, or a formula based on the value of the trust may be used to calculate compensation. The State of Maryland has statutes that regulate such fees.

A Trustee can be personally liable for major mistakes or misconduct while managing a trust. For instance, engaging in self-dealing could result in personal liability.

While beneficiaries do not own the trust property outright, they do have an interest in the assets. They are entitled to certain rights, such as receiving updates on trust activities and requesting an accounting of how the assets are being managed or distributed.

The trust agreement may specify a termination date or outline conditions for its end. If no termination is mentioned, the Trustee or beneficiaries may have the authority to bring the trust to a close, or they can seek a court’s approval to terminate the trust.