Accavallo & Company, LLC

Proper Trust Administration: Key Steps and Considerations

Trust administration is a multifaceted process that demands careful attention to detail, compliance with legal requirements, and effective communication with all stakeholders. To ensure that trusts are administered efficiently and in line with the grantor’s intentions, trustees must adhere to a series of essential steps and practices.


The Trust Agreement:
The trust agreement acts as a set of rules dictating how these assets should be handled and distributed. A trustee’s role is to follow these rules meticulously while also adhering to state and federal laws. The trustee is obligated to act in the best interest of the beneficiaries and uphold their fiduciary duties.

The Trustor’s Intent:
Understanding the trust agreement is necessary for effective administration. Trustees must be familiar with their appointment as trustee, the provisions for distributions, and any specific powers granted to them. Being well-versed in the terms of the trust agreement allows trustees to make informed decisions and avoid conflicts.

Organizational skills play a significant role in successful trust administration. Trustees should establish an effective system for record-keeping and information management. This includes creating spreadsheets listing all trust assets and liabilities. A safeguarded binder with essential documents, such as the trust agreement, death certificates, bank statements, and insurance policies, can facilitate the administration process.

Accounting Functions:
The trustee’s first practical step is to gather all trust assets. These assets can include real estate, bank accounts, investment accounts, life insurance proceeds, and more. Detailed records, such as account statements and titles, should be stored in the trustee’s binder. When dealing with third-party institutions, trustees should provide proof of their authority, usually through a death certificate and a copy of the trust or an affidavit of trust.
Setting up a dedicated bank account for the trust simplifies asset management. Trustees may need to obtain a tax identification number (TIN) for the trust, a task that can be done online with the IRS or with the assistance of an attorney or a certified public accountant (CPA).

Trust Obligations:
While the ideal scenario involves gathering all assets before making payments and may require paying off obligations before all assets are collected. Trustees must identify and settle any outstanding obligations, keeping thorough records of loans, bills, and credit card balances. Validating these obligations with necessary documentation is essential. Trustees must also be prepared to file the deceased grantor’s final income tax return and consider potential estate taxes.

Making Distributions:
Transparency and effective communication are vital during the distribution phase. Trustees should send beneficiaries an accounting of the trust, outlining assets, expenses, and estimated distributions. Beneficiaries can review the information and ask questions, ensuring a clear understanding of the administration process. Once beneficiaries approve the accounting, trustees can initiate distributions.


Conduct Annual Trust Meetings: Trustees should organize annual trust meetings to discuss the trust’s performance, financial status, and any significant decisions. These meetings provide an opportunity for open dialogue among trustees, beneficiaries, and advisors, fostering transparency and understanding.

Establish an Investment Policy Statement (IPS): Creating an Investment Policy Statement for each trust can guide investment decisions and ensure alignment with the grantor’s objectives. The IPS outlines the investment goals, risk tolerance, asset allocation, and strategies to be followed. Adhering to the IPS helps maintain consistency and discipline in managing trust assets.

Obtain Acknowledgements from Power Holders and Fiduciaries: Consider having power holders, fiduciaries, and other relevant parties sign a written acknowledgement of their roles and responsibilities. This document should confirm their understanding of their duties and actions, reducing the risk of misunderstandings or future disagreements.

Prepare a Trust Balance Sheet: Maintaining an up-to-date trust balance sheet is crucial. This sheet provides a snapshot of the trust’s assets, liabilities, and overall financial picture. Regularly updating the balance sheet ensures accurate tracking of changes in assets and liabilities over time.

Timely Confirmation of Payments: Trustees must diligently confirm that all payments are made on time and in accordance with the trust’s terms. This includes verifying the punctual payment of interest, GRAT annuity payments, and any other financial obligations. Timely payments demonstrate responsible management and maintain the trust’s financial integrity.

Verify Correct Trust Account Usage: Trustees must be vigilant about using the correct trust accounts for deposits and payments. Mixing trust funds with personal funds can lead to legal challenges and undermine the separation necessary for proper trust administration. Clear segregation of trust funds is essential for maintaining the trust’s integrity.

Ensure Proper Asset Titling: Assets intended for the trust should be properly titled in the trust’s name. Accurate titling ensures that the assets are officially part of the trust and subject to its terms. Incorrect titling can lead to confusion, delays, and potential legal disputes during trust administration.

Administering Trusts with Precision and Care Administering trusts requires meticulous attention to detail, adherence to legal requirements, and effective communication. By holding annual trust meetings, creating Investment Policy Statements, obtaining acknowledgements from key parties, maintaining accurate records, confirming payments, adhering to formalities, and ensuring proper asset titling, trustees can fulfill their fiduciary duties and ensure the smooth administration of trusts. These practices uphold the grantor’s intentions, benefit the beneficiaries, and safeguard the overall integrity of the trust.

Consulting with your Attorney, Accountant and Financial Advisor as a team approach ensures proper administration of a trust. We are here to help with any questions that you may have regarding estate and trust planning and trustee responsibilities. Please contact us at (203) 925-9600 or [email protected]

Dual Heading Example

Insert a meaningful line to evaluate the headline.

Sherri Fisher is a Tax Manager at Accavallo & Company, LLC.  Sherri has longstanding expertise in Trust and Estate Taxation, Eldercare, and Estate planning. Sherri appreciates the relationships she has built with estate planning attorneys and advisors, to provide a team approach to assisting her clients. Sherri also has seasoned experience in business and individual taxation and is partial to assisting start-ups in developing overall accounting and operating plans.

Prior to joining Accavallo & Company, LLC, Sherri was a manager in a large firm, servicing high net worth trust clients, business, and personal clients. She was also a Partner in a large bookkeeping firm, which specialized in cloud accounting systems for regional and national companies. Sherri led a team in assisting clients to organize their accounting systems.  She is a graduate of Florida Atlantic University with a B.S. degree in Accounting.    

Sherri’s experience includes working with companies and organizations in a variety of industries including:

  • Investment Trusts

  • DAPT and Family Investment Partnerships

  • Estate and Probate Administration

  • E-Commerce

  • Manufacturing

  • Construction

  • Real Estate Investment

  • Marketing and Service-based industries

In addition to her professional accomplishments, Sherri is an Intuit Advanced Pro Advisor, Intuit Future Firm Advisory Board member, member of the Valley WIN Network, and proudly served as past Connecticut Public School liaison for the Yale Tommy Fund for Childhood Cancer. Sherri enjoys time with her family, Cleveland sports, thrifting and gardening.