Trust Administration in Georgia

If you have been named as the trustee of a trust under some type of trust agreement or as a trustee of a testamentary trust created by a deceased person's last will and testament, then you will need to know what is required of you as the trustee.  (When the trust is created by the terms of a Last Will and Testament, it is referred to as a testamentary trust.)  The title "trustee" invokes a sense of great responsibility.  In addition to carrying out the instructions in the trust agreement or will, the trustee usually is responsible for managing, preserving, and administering another person's assets for the benefit of the named beneficiary or beneficiaries.

The document by which the trust was created (i.e., the Trust Agreement or Last Will and Testament) generally provides the trustee with guidelines related to the scope and duration of the trustee’s authority, how assets are to be managed and distributed, and when and how to work with the beneficiaries.  While direction may be provided to the trustee, the document establishing the trust often may be complicated and even may have ambiguous or conflicting terms.  Therefore, many trustees, including professional trustees, consult with attorneys to ensure that they carry out their duties correctly and in such a manner as to effectuate the intent of the grantor of the trust (i.e., the person who creates the trust). 


Under Georgia law, a trustee is deemed to be a fiduciary, and as such is held to a high standard of care.  A trustee is accountable to the beneficiaries and, in some instances, a court.  A trustee is expected to act prudently and in the best interests of the beneficiaries at all times.  A trusteeship may involve a variety of duties, situations, and parties.  Common examples include managing the financial affairs of an elderly person, running a business, and managing property for a minor or disabled individual.

 

I.     A Trustee's Authority

A trustee’s authority is granted by the grantor of the trust in a Trust Agreement or Last Will and Testament.  It is important that you thoroughly review the Trust Agreement or Last Will and Testament and understand the responsibilities with which you would be charged.  In addition, you should understand the duration of your authority, and what you can and cannot do as the trustee.  Your trusteeship generally will terminate upon the happening of some specified event (e.g., the beneficiaries reaching a certain age), or end because the assets of the trust are completely depleted.

II.     A Trustee's Duties

Generally speaking, a trustee has three kinds of duties to the trust and its beneficiaries:

  • A duty of impartiality (not to favor the interest of one party over another)
  • A duty of undivided loyalty (not to put the trustee’s own interest in conflict with those of the trust)
  • A duty to administer the trust with care and prudence

In administering a trust, the trustee shall exercise the judgment and care of a prudent person acting in a like capacity and familiar with such matters, considering the purposes, provisions, distribution requirements, and other circumstances of the trust.

A trustee always must act to further the interests of the trust and the beneficiaries.  The trustee should not enter into transactions in which the trustee will benefit at the expense of the trust or its beneficiaries.  In addition, even if a transaction is fair and in the best interests of the trust and the beneficiaries, the trustee should avoid all self-dealing.  Finally, a trustee must keep the trust’s assets separate from the trustee's own property, and the trust’s assets must be readily identifiable.

While the trustee ultimately is accountable, unless otherwise specified in the Trust Agreement or Last Will and Testament, he may employ professionals and other agents to administer the trust.  Some grantors may appoint co-trustees in the Trust Agreement.  Generally, each trustee remains responsible and must report any misconduct of or by a co-trustee.

In addition to the ethical duties mentioned above, a trustee has administrative duties.  Administrative duties generally include the following:

  • A trustee must set up and keep complete financial records for the trust.
  • Unless the trust provides otherwise, the trustee must provide a qualified beneficiary with a report of information, to the extent relevant to that beneficiary's interest, about the assets, liabilities, receipts, and disbursements of the trust, the acts of the trustee, and the particulars relating to the administration of the trust, including the trust provisions that describe or affect such beneficiary's interest.  Unless the trust provides otherwise, a trustee shall account at least annually, at the termination of the trust, and upon a change of trustees to each qualified beneficiary of an irrevocable trust to whom income is required or authorized in the trustee's to be distributed currently, and to any person who may revoke the trust.  At the termination of the trust, the trustee also shall account to each remainder beneficiary.  An accounting furnished to a qualified beneficiary shall contain a statement of receipts and disbursements of principal and income that have occurred during the last complete fiscal year of the trust or since the last accounting to that beneficiary and a statement of the assets and liabilities of the trust as of the end of the accounting period.
  • Most trusts (other than revocable living trusts) will have a distinctive tax identification number and will be required to file annual state and federal income tax returns.
  • A trustee has the duty to invest and manage trust property. In investing and managing trust property, a trustee shall exercise the judgment and care under the circumstances then prevailing of a prudent person acting in a like capacity and familiar with such matters, considering the purposes, provisions, and distribution requirements of the trust.
  • Unless the trust instrument provides otherwise, a trustee shall reasonably manage the risk of concentrated holdings of assets in a trust by diversifying or by using other appropriate mechanisms.  The trust instrument may relieve the trustee from having to diversify investments.
  • A trustee often is required by the Trust Agreement or Last Will and Testament to make distributions to beneficiaries.  The terms under which distributions must or may be made can differ greatly from trust to trust.  In some trust instruments, the trustee is required to make distributions for the beneficiary’s health, education, support and maintenance.  In some trust instruments, the trustee may have the discretion to make distributions for whatever the trustee deems to be in the best interest of the beneficiary.  Other trust instruments may provide for a fixed amount to be paid at certain times.  Under certain circumstances, a trustee may be personally liable for improper distributions, and may be compelled by a court to make a distribution at the beneficiary’s request.

 

III.     A Trustee's Personal Liability

The trustee shall be accountable to the beneficiary for the trust property.  A violation by the trustee of any duty that the trustee owes the beneficiary shall be a breach of trust.  In general, a trustee may be personally liable to the beneficiaries for any loss or gain to the trust estate if the trustee:

  • Failed to exercise the care and skill of a person of ordinary prudence in managing the property of another
  • Negligently or intentionally did something the trustee ought not of have done
  • Negligently or intentionally failed to do something the trustee ought to have done

 

IV.     Compensation and Expenses of Trustees in Georgia

A trustee is entitled to be reimbursed out of the trust property for reasonable expenses that were properly incurred in the administration of the trust.  Trustees shall be compensated in accordance with either the trust instrument or any separate written agreement between the trustee and the grantor of the trust.  In Georgia, if there is no provision for trustee compensation in the trust instrument and there is no separate written agreement between the trustee and the grantor relating to the trustee's compensation, (1) with respect to a corporate trustee, the trustee shall be entitled to compensation based on its published fee schedule, provided such fees are reasonable under the circumstances; and (2) with respect to an individual trustee, the trustee shall be entitled to compensation as follows: (a) one percent of cash and the fair market value of any other principal asset received upon the initial funding of the trust and at such time as additional principal assets are received; and (b) an annual fee calculated in accordance with the following schedule based upon the cash and the market value of the other principal assets valued as of the last day of the trust accounting year prorated based on the length of service by the trustee during that year.

  • 1.75 percent per year on the first $500,000 (market value)
  • 1.25 percent per year on the next $500,000 (market value) 1.00 percent per year on the next $1,000,000 (market value)
  • 0.85 percent per year on the next $3,000,000 (market value) 0.50 percent per year based on values over $5,000,000

Word of Caution

These guidelines cannot tell you everything you need to know about being a trustee, and are intended to alert you to your duties and responsibilities as a trustee.  Georgia has a trust code which governs the rights and responsbilities of trustees in Georgia.  Given the risks of personal liability, if you are uncertain about any of your responsibilities, rights, or powers as a trustee, you are encouraged to consult with an attorney familiar with trust law.  It often is less complicated and expensive to obtain advice to prevent a problem than it is to defend a problem later.

If you need an attorney to advise you regarding trust administration in Georgia, contact the firm of Chambers, Chambers & Chambers, LLP.  Our attorneys have served clients in DeKalb County, Fulton County, Cobb County, and Gwinnett County, Georgia, as well as other clients in other Georgia counties.  If you are searching for a lawyer to advise you in connection with trust administration in Georgia, contact us.

Disclaimer:  The above memorandum provides some general information about trust administration in Georgia.  It is provided for informational purposes only and should not be considered legal advice.  No person should act or refrain from acting on the basis of information contained herein.  You should seek appropriate legal advice on your particular legal matter from an attorney licensed in your state.  This content may not reflect current legal developments, and this firm disclaims all liability with respect to actions taken or not taken based on any information contained herein.

 

 

 

 

 

 

 

 

 

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