If you are administering the trust of someone who has passed away, you may feel overwhelmed by the responsibilities and tasks you have to perform. Trust administration can be complex and time-consuming, and it is easy to make mistakes that can have severe consequences for you and the beneficiaries. In this blog post, I will share some tips on avoiding common errors in trust administration and help you fulfill your role as a trustee with confidence and competence.

Carefully Read the Trust Agreement and State Law

The first thing you need to do as a trustee is to carefully review the trust agreement and the Colorado Uniform Trust Code. The trust agreement is the document that spells out the grantor's wishes, the terms of the trust, and your powers and duties as a trustee. The Colorado Uniform Trust Code is the state law that governs trusts and trustees in Colorado. You need to familiarize yourself with both sources of authority and follow them faithfully. If you have any questions or doubts about the trust agreement or the law, consult an experienced probate and trust attorney.

Understand Your Fiduciary Duties

The second thing you need to do as a trustee is to ensure you understand the fiduciary duties you owe to the beneficiaries. A fiduciary duty is a legal obligation to act in the best interests of another person or entity. As a trustee, you have several fiduciary responsibilities, such as:

• Duty of loyalty: You must act solely in the interests of the beneficiaries and avoid any conflicts of interest or self-dealing.
• Duty of prudence: You must manage the trust assets with care, skill, and diligence and invest them reasonably and diversified.
• Duty of impartiality: You must treat all beneficiaries fairly and equally, not favor one over another.
• Duty of accounting: You must keep accurate records of all transactions and activities related to the trust and provide regular accountings to the beneficiaries.
• Duty of administration: You must administer the trust according to its terms and purposes and in compliance with the law.

If you breach any of these fiduciary duties, you may be held personally liable for any damages or losses that result from your actions or inactions.

Common Mistakes and Oversights

The third thing you need to do as a trustee is to avoid some common mistakes that trustees make. Here are some examples of such errors:

1. Failing to secure personal property properly: If the trust includes personal property, such as jewelry, art, or collectibles, you must protect them from theft, damage, or loss. You should inventory all personal property, store them safely, insure them if necessary, and appraise them.
2. Assuming that you don't need to provide regular accountings to the beneficiaries: Even if the trust agreement does not explicitly require you to give accountings, you still have a fiduciary duty to do so under the law. Accountings are essential for keeping the beneficiaries informed of the status and performance of the trust assets and documenting your actions as a trustee. You should provide accountings at least annually or more frequently if requested by a beneficiary or ordered by a court.
3. Failing to administer the trust with an appropriate level of diligence: Trust administration is not a one-time event but an ongoing process that requires constant attention and monitoring. You need to keep track of all income and expenses related to the trust, pay taxes and fees on time, distribute income and principal to the beneficiaries according to the trust agreement, review and update the investment strategy regularly, communicate with the beneficiaries and co-trustees effectively, and respond to any issues or challenges that may arise.

These are just some of the common mistakes that trustees make. Many other potential pitfalls can jeopardize your success as a trustee. That is why it is advisable to seek professional guidance from a qualified probate and trust attorney who can help you navigate the complexities of trust administration and avoid costly errors.

As attorneys in Colorado specializing in probate and trust administration, we have helped many clients like you fulfill their duties as trustees and achieve their goals as grantors. If you need assistance with any aspect of trust administration, please contact us today for an attorney evaluation session. We look forward to hearing from you.