First, some vocabulary. The person who makes the trust is called the settlor. The person who manages the trust is called the trustee. The person whose receives the benefits of the trust is the beneficiary. If the trust is funded while the settlor is still alive, it’s a lifetime trust. If it’s established by a will, it’s a testamentary trust. For some trusts, the functions of the settlor, trustee and beneficiary are carried out by the same person.
The settlor can designate a person such as a family member or a friend, or entity such as a bank or trust company to act as the trustee to manage the assets. When the settlor dies, the trustee or successor trustee administers the trust as per the terms of the trust agreement. Assets that are placed in a trust are not subject to probate in New York because they pass outside of a decedent’s estate.
Purchasing, Selling, Investing and Distributing Trust Assets
The trustee usually has the power to purchase, sell, maintain and invest trust assets. The trustee must act in a prudent manner with reasonable care. Many times trusts require that the assets be disbursed over a period of time to the beneficiaries. A trustee position can last for a long time and is a time commitment and a responsibility for the trustee. When trustees encounter challenges from the beneficiaries or have to make legal decisions, they tend to use the services of New York probate and estate attorneys.
Income and Principal Distribution Decisions
Trustees may need to make decisions regarding both income distributions and principal distributions. Income may be distributed quarterly or monthly. An example of income from a trust asset may be rental income from an apartment building owned by the trust. Principal assets may be a lump sum distribution when a beneficiary attains a certain age or when a certain condition is met. It is important to carefully read the trust agreement to determine how assets are going to be distributed to the beneficiaries. A New York probate and estate attorney is usually called upon when a trustee is faced with an unclear situation.
No Power to Make Healthcare Decisions
A trustee does not have the power to make health care decisions other than to pay a medical bill. If a settlor wants the trustee to have those powers, the settlor will need to make a health care power of attorney in accordance with New York laws. A New York probate and estate attorney can prepare the health care power of attorney. The health care power of attorney is issued to give a health care provider instructions on health care procedures when a person is unable to do so on their own. Some people confuse the health care power of attorney with a living will. A living will gives instructions to a health care provider regarding life support.
Since trusts are set up differently, it is important for the trustee to review the entire trust agreement carefully to make sure that the trustee understands what is expected of them. It is paramount for a trustee to have their own New York estate lawyer go over the terms of the trust before they agree to take on the responsibility.
Whenever a trustee is faced with a difficult decision, it is best to seek the advice of a New York Estate attorney. To schedule a meeting with an attorney, call the Law Offices of Albert Goodwin at (212) 233-1233.