Taxation of Trusts Generally
Individuals may claim deductions for trade or business expenses. Therefore, trusts are also permitted to claim these same deductions, provided the expenses in question were paid or incurred in a profit-seeking activity that is regular, substantial, and continuous.
The trustee generally has the authority to withdraw money from a trust to cover the cost of third-party professionals, as well as any other expenses arising as a result of administration.
Reasonable and Necessary Expenses: Trustees are typically entitled to reimbursement for expenses directly related to trust administration. These expenses should be reasonable and directly benefit the trust.
Trustees may be personally liable if the assets of the charity are not sufficient to meet the indemnity. But only the people who are trustees at the time the tort was committed can be made liable in this way, unless successor trustees accept the liabilities of their predecessors.
Suing the trustee if they have failed to competently do their job, breached their fiduciary duties, or caused harm to the trust is one of your most important rights as a trust beneficiary.
Per California trust law, if a trustee has committed a breach of their fiduciary duty, the court can deem them personally liable for damages. The extent of liability, ultimately, depends on the severity of their offense and your situation.
But as part of your trust management duties, your loved one can permit you to use the funds in a trust to cover their monthly bills in a trust agreement. Additionally, the trustee can use the money in a trust to pay bills in the aftermath of a loved one's death.
As of Jan 5, 2025, the average hourly pay for a Chapter 13 Trustee in the United States is $19.95 an hour.
You can still use the trust to cover some expenses, such as clothing and food. However, you can't pay for these from the principal assets in the trust. You can only use the trust's income, such as profits from stock investments. If you spend into the principal, all assets in the trust are at risk.
Serving as the trustee of a trust instills a person with significant power. They have access to all the trust assets, but with a catch: They can only use those assets to carry out the instructions of the trust.
Examples of executor misconduct and trustee misconduct include: Failing to provide accountings to beneficiaries. Favoring one beneficiary over another. Misappropriating or misusing estate or trust assets for personal gain.
In other words, while the trustee has the legal authority to manage and control the assets, they do so not for their own benefit, but for the beneficiaries. The trustee has a fiduciary duty to act in the best interest of the beneficiaries when managing the property of the trust.
The annual maintenance costs of a trust typically include legal fees, trustee compensation, and tax preparation charges. These expenses can vary based on numerous factors such as the complexity of the trust, trustee's experience, and the total value of the estate.
This rule generally prohibits the IRS from levying any assets that you placed into an irrevocable trust because you have relinquished control of them. It is critical to your financial health that you consider the tax and legal obligations associated with trusts before committing your assets to a trust.
Yes trustee should put utilities in the name of the trust if utility will allow it. Otherwise the trustor person creating trust would put them in their name personally. But it makes sense here to put them in trusts name if possible. Trustee would contact utilities about transfer.
Monitoring Your Bank Account Activity
Your trustee may review your bank statements periodically to ensure that you comply with the terms of your repayment plan. Any significant changes or unexpected transactions should be promptly reported to your attorney and the trustee.
In California, private trustees are usually paid hourly rates between $25-$35, professional trustees charge an average hourly rate of $100+, while corporate trustees are often paid a percentage of the trust's assets, which averages between 1%-2% per year.
You don't have to pay unsecured debts in full. Instead, you pay all your disposable income toward the debt during your three-year or five-year repayment plan. The unsecured creditors must receive as much as they would have if you'd filed Chapter 7.
It depends on what type of trust has been established
This does mean that the trustee gets to make all the decisions. It is their discretion that determines when you can take the money out of that fund.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
Living trusts do not protect your assets from creditors. If someone has a claim against you, they can still access these assets. If you have catastrophic medical bills and the hospital files a claim to receive payment, then may still be in trouble. You are considered the owner of the trust assets.
A trustee must abide by the trust document and the California Probate Code. They are prohibited from using trust assets for personal gain and must act in the best interest of the beneficiaries. Trust assets are meant for the benefit of the trust beneficiaries and not for the personal use of the trustee.
Ultimately, trustees can only withdraw money from a trust account for specific expenses within certain limitations. Their duties require them to comply with the grantor's wishes. If they breach their fiduciary duties, they will be removed as the trustee and face a surcharge for compensatory damages.
If you are the designated beneficiary on a deceased person's bank account, you typically can go to the bank immediately following their death to claim the asset. In general, there is no waiting period for beneficiaries to access the money; however, keep in mind that laws can vary by state and by bank.