One of the first things we ask for when we obtain a new trust client is “Can you provide us with a copy of the trust agreement?”
You’d be surprised that, sometimes, the answer is, “I’m not sure where it is and I’ll have to find it and send it over later,” or, “It was created by Mom or Dad’s estate and I don’t have a copy,” and worst yet, “I’ve lost it and don’t have another copy”.
What worries me about these answers is the lurking fiduciary liability. The trust agreement is the instruction manual on how to operate the trust. If you don’t have it, then how can the beneficiaries be sure that the trust is being administered the way it should be? You may think that, since the beneficiaries are your family members, that they would never sue you for breach of fiduciary duty. But, it may not be the current beneficiaries that sue you, but rather, the more remote lineal descendants that the trust will continue to provide future benefits to.
It is also important to retain a copy of the trust agreement, in case you need to provide it in order to perform certain trust transactions. For example, bankers or brokers won’t perform the transaction (i.e. cash a check or transfer a stock) until you provided the trust agreement showing your designation as Trustee.
So, what can you do when you don’t have a copy of the trust agreement? Here are some suggestions:
If you know who the drafting attorney was, then you may be able to contact them and request another copy. But, if the attorney is deceased or retired, you may go on a wild goose hunt finding out where the files were transferred.
Investment advisors often times, requested a copy of the trust agreement when the account was opened. Therefore, you may be able to obtain a copy of the trust agreement from them.
If the trust was a testamentary trust, find out who the Executor or Administrator of the estate was and contact them. However, that could be an issue if the Executor/Administrator is now deceased.
If the decedent had to file a Federal or State Estate tax return or a gift tax return to report the taxable gift, more than likely, a copy of the trust agreement would have been attached to the return. However, beware that IRS may not be receptive to your request if you can’t prove that you are the Executor or Trustee.
Ask the prior accountant. Tax preparers should have copies of the trust agreements/decedent’s Wills in their permanent files.
If you still can’t find the trust agreement, you may have to petition the court to get formally appointed as personal representative, and this would require the assistance of a knowledgeable trust or probate attorney.
One thing to remember is that trust agreements are not public record. So, you can’t just go to the local probate court and obtain a copy of a trust agreement. The grantor wanted to keep the trust assets private, hence the difficulty in finding a misplaced trust agreement.
The lesson to be learned, if you are a non-professional trustee, is that you must keep a copy of the trust agreement in a safe place. Never throw away a will or trust agreement!
If you have questions about trust documents or how to effectively prepare yourself and your family for the future, contact us at 216. 831.0733. We're happy to help and ready to start the conversation.