Tips for Trustees: How to Ensure Compliance During Trust Administration

Serving as a trustee involves considerable responsibility. You may manage property someone spent years building while also making decisions that affect family members or other beneficiaries. Depending on the trust, your responsibilities may include taking control of assets, paying expenses, making distributions, keeping records, and communicating with beneficiaries, all while following the trust document and applicable Minnesota law. 

At Abagail M. Nouska Attorney at Law in Cloquet, Minnesota, I serve clients with their estate planning, probate, and trust administration needs. I can review the trust you administer, explain your responsibilities, and help you address legal issues that arise during administration. Contact my office today to schedule a consultation. 

Start With the Trust Document

Read the trust carefully before making decisions about its property or distributions. Minnesota law requires you to administer the trust in good faith according to its terms and purposes, the beneficiaries' interests, and applicable law. 

Many provisions of the Minnesota Trust Code are default rules that the terms of a trust may change. However, some requirements cannot be overridden. Pay particular attention to provisions concerning: 

• Beneficiaries: Identify who has an interest in the trust. 

• Distributions: Determine when distributions are required and when you have discretion. 

• Trustee powers: Review your authority for how to manage trust property. 

• Restrictions: Identify conditions or limits that apply to particular assets or beneficiaries. 

If a provision is unclear, determine what it requires before taking action. As an experienced Minnesota estate planning lawyer, I can review the trust language and help you understand how it affects your authority and responsibilities as trustee. 

Protect Trust Property and Keep Adequate Records

Minnesota law generally requires you to take reasonable steps to take control of and protect trust property. The law contains an exception for certain tangible personal property held in a revocable trust when that property is not in your possession or control. 

You must also keep adequate records of the trust's administration and keep trust property separate from your own property. Maintain records of trust income, expenses, purchases, sales, distributions, and other significant transactions. Accurate records can show how you handled trust property and help you respond to questions about the administration. 

Avoid Conflicts of Interest

As a trustee, you have a duty of loyalty to the beneficiaries. You cannot put your own interests above theirs. Use particular care with transactions that could benefit you personally or involve certain people or businesses connected to you. Some transactions involving a conflict between your personal interests and your duties as trustee may be voidable by an affected beneficiary unless an exception applies. 

If the trust has two or more beneficiaries, you must also administer it impartially while considering their respective interests. This does not necessarily require identical treatment because beneficiaries may have different rights under the trust. 

Manage Trust Assets Prudently

Minnesota law requires you to administer the trust as any prudent person would. You must consider its purposes, terms, distribution requirements, and relevant circumstances and exercise reasonable care, skill, and caution. 

If you manage trust investments, Minnesota's prudent investor rule generally requires you to consider each investment as part of the trust portfolio as a whole. You generally must also diversify investments unless you reasonably determine that special circumstances make diversification inconsistent with the trust's purposes. The trust instrument can expand, restrict, eliminate, or otherwise alter the prudent investor rule. 

You may delegate duties and powers that a prudent trustee with comparable skills could properly delegate under the circumstances. If you do, you must use reasonable care, skill, and caution in selecting the agent, establishing the scope and terms of the delegation, and periodically reviewing the agent's actions. 

Keep Beneficiaries Properly Informed

If you are administering an irrevocable trust, you generally need to keep qualified beneficiaries reasonably informed about the trust's administration and material facts they need to protect their interests. Minnesota law defines a qualified beneficiary based on the person's current or potential right to receive trust income or principal under specified circumstances.

Unless unreasonable under the circumstances, you must also promptly respond to a beneficiary's request for information related to the administration of an irrevocable trust. 

However, there are exceptions to these requirements. For example, the trust may expressly require you to keep the person who created it, or another specified person, informed during a particular period instead. A beneficiary may also waive certain rights to receive information. 

At Abagail M. Nouska Attorney at Law, I can help you determine what information you must provide, who should receive it, and how to handle requests for trust records or other information. I can also help you communicate with beneficiaries when questions arise about administering the trust. 

Address Questions Before Taking Action

Some trustee decisions require more than routine administration. You may need to determine whether you have authority to make a particular distribution, sell trust property, enter into a transaction, delegate a responsibility, or take an action that could create a conflict of interest. Understanding your authority before you act can help you avoid violating the trust's terms or your duties as trustee. 

Trust administration may also overlap with probate and estate administration when a person dies with assets both inside and outside a trust. I can evaluate whether the trust gives you authority to take a proposed action, explain any conditions or limits that apply, and advise you on distributions, property transactions, or potential conflicts before you proceed. 

Explore Your Trustee Responsibilities with a Skilled Minnesota Attorney

As a trustee, you must follow the trust and fulfill the duties that apply to its administration. Protecting trust property, keeping accurate records, making prudent decisions, and providing required information to beneficiaries are important parts of that responsibility. 

At Abagail M. Nouska Attorney at Law in Cloquet, Minnesota, I serve clients throughout northeastern Minnesota, including Carlton, Moose Lake, and surrounding areas. I can assist with trust administration, estate planning, and probate matters, and can help you understand and carry out your responsibilities as a trustee. Call my office now to schedule a consultation.