For example, a parent may have concerns about a child’s ability to responsibly handle a lump-sum inheritance. The parent, working with an attorney, would create a trust agreement specifying when and for what purposes trust money could be used. After the parent’s death, any inheritance funds would be deposited, held and invested in a trust account. All future distributions would have to meet the conditions of the trust agreement.
But a trust, of course, cannot operate itself. Someone must manage the trust funds and take actions to carry out the trust terms. This work is referred to as trust administration. Many people hire an attorney to administer the trust.
In addition to investing and distributing trust assets, administration includes documenting compliance with fiduciary, tax and accounting requirements of trusts.
The trustee is ultimately responsible for all trust administration. An error may cause an unhappy beneficiary to make a claim against the trustee for a breach of fiduciary duty. If successful, such a claim could result in personal liability for the trustee.
Understandably, given the work involved and the potential for personal liability, an individual trustee may hire an attorney for guidance.
Another option is to hire a professional fiduciary, such as a bank, to serve as the trustee or as the agent for the individual trustee. A trust administrative officer is a bank employee who often is also an attorney. The trust administrative officer typically works with a portfolio manager to invest and manage trust assets. The administrative officer is responsible for understanding and interpreting the language of the trust, responding to requests from beneficiaries for distributions and completing documentation to keep the trust in legal compliance.