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Why a trustee needs receipts and records for everything they do

On Behalf of | May 18, 2020 | Uncategorized

For someone planning their estate, a trust is a useful tool that can give them increased control and reduce the risk of probate, contention among their family members and other issues during estate administration. Trusts can come in many shapes and sizes, and their benefits range from greater control over the inheritance to protection from creditors and taxes.

However, despite these benefits, a trust can be a source of permanent work for the individual chosen to serve as trustee. These people have the duty of not only maintaining the assets in the trust for the benefit of others, but they must also document everything they do and try to prevent others from violating the rules and structure of the trust.

Documentation is critical for a trust and its trustee. The right records will show the proper administration of the trust and its assets while also protecting the trustee from allegations that they violated their fiduciary duty or otherwise have failed to uphold their obligations to the trust, its creator and its beneficiaries.

Records for everything from sales to distributions show you’ve done your job

Different trusts can have different requirements and structures in place. A special needs trust may have limitations on how much you can disperse in a given year to ensure that the beneficiary can continue receiving certain government benefits. A spendthrift trust may require that you carefully vet all disbursal requests prior to approving them to ensure that someone doesn’t use assets for gambling, drugs or shopping.

Every time you do something with the trust or one of its assets, you absolutely should have written documentation. For example, a withdrawal from a special needs trust to pay for education could include records such as a receipt from payment to the school or the bookstore on campus.

For larger transactions, like the sale of real estate, it’s important that you first establish a fair price for the item and comply with the instructions of the trust’s creator in how you dispose of the asset. Doing so helps prove that you did not violate your fiduciary duty by potentially selling it to someone for your own gain. It will also show that you didn’t diminish the value of the trust through incompetence.


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