Under South Carolina Law, Trust Administrations, unlike Probate Administrations, are not overseen by the Probate Court. This allows for the Trust Administration to run more expeditiously than a Probate Administration, as there are no creditor claim periods that delay distribution. A Trustee is a fiduciary and is held to a very high standard. Fiduciary law does not demand absolute perfection in judgment, but it does demand absolute loyalty, absolute honesty, and absolute disclosure, even if that disclosure hurts.
The authority of a Trustee comes from the Trust Agreement, and the duties and powers as described in the Trust Agreement. A Trustee is liable to the beneficiaries for any loss to the trust estate and for any gain the trust estate should have realized. A Trustee is must keep track of all income to, distributions from, and expenditures by the trust. Generally, a Trustee must give an account of this information to the beneficiaries on an annual basis, although this may not be required under the trust agreement.
During the lifetime of the Trustmaker, all income generated from the Trust shall be reported on the Trustmaker’s personal income tax return, provided that the Trust is revocable and qualifies as a Grantor Trust. If the trust is revocable Grantor Trust, the IRS permits that the trust may use the Trustmaker’s social security number to file an income tax return.
If the Trust is irrevocable or does not qualify as a Grantor Trust, the Trustee may have an obligation to file fiduciary income tax returns using IRS Form 1041. The obligation arises if the trust had any “taxable income” or had “gross income” of $600.00 or over, regardless of the amount of “taxable income” in any taxable year.
Upon the death of the Trustmaker, the Trustee is responsible for winding up the affairs of the Trustmaker, inventorying and appraising all assets held under the Trust, filing the appropriate tax returns, settling any debts, claims and taxes that are owed, and distributing the assets to the beneficiaries, per the Trust Agreement.
For a complete Trustee Manuel, please contact the Law Office of Kathryn M. Cockrill, LLC. Kathryn Cockrill offers a free consultation to discuss the duties and obligations of a Trustee, as well as the steps involved in a Trust Administration.