Trust administration requires the fiduciary to perform very specific and important tasks. The fiduciary, or trust administrator, is the person named by the grantor who will be responsible for administering the trust and protecting its assets for the benefit of the beneficiaries.

Trusts provide that the principal and income from it must be separated. In many cases, the trust will designate intervals at which the income should be distributed to the designated beneficiary while naming a later time when the principal will be transferred. A common example may be a trust that is set up in such a way that the income from it is distributed to a surviving spouse while the principal is transferred to the grantor’s children upon the spouse’s death.

As a fiduciary, the trust administrator will owe a duty of care to the trust beneficiaries. An important part of this duty is to invest the trust assets prudently in order to produce income. For this reason, the fiduciary who is chosen to administer a trust should be one who has financial experience or who is willing and able to seek investment advice. The fiduciary will also be required to file annual tax returns for the trust as well as to provide beneficiaries who are paid income from it with financial statements for tax purposes. If he or she files the trust tax return late, the fiduciary may be personally responsible for paying any associated tax penalties and fees.

Trusts may also be set up in a way that provides important estate tax benefits. People who have large and complex estates might consider establishing trusts in order to take advantage of the benefits available to them. People may want to discuss the possibility of a trust with their estate planning attorney.