Decoding A Trust Agreement

Decoding

Some day you may need to read, and understand, a Trust Agreement. On the pleasure scale, it will fall somewhere between undergoing a root canal without anesthesia and cleaning out the septic tank.

So we will take it step by step.

A Trust Agreement is, basically, a set of instructions to a fiduciary regarding how to invest and distribute property.

To understand a Trust Agreement, start out by identifying the players – the Settlor (who set up, and probably funded, the Trust), the Trustee (who administers the Trust), and the Beneficiary (who will receive money or other assets from the Trust). Spend some extra time on the paragraphs that describe the beneficiaries, because every Trust beneficiary, no matter how remote, has rights under the law.

Then look for the property in the Trust – possibly identified on a referenced Exhibit, or perhaps within the Trust itself. If the Trust doesn’t contain a description of property, then you will have to look for outside documents (like a Will, a Deed or a financial account) that indicate the Trustee is, or will be the owner.

Next, look at the distribution clauses. These direct the Trustee on how much and when money or assets may, or must, be distributed to the beneficiary. If you are the beneficiary, you will find the distribution clauses highly interesting.

Now review the Trustee provisions. These should set out the guidelines for investment decisions, self-dealing, Trustee compensation, and Trustee succession if the current Trustee is unable to act.

Finally, look at all of the paragraphs at the end of the document. You may be tempted to skip over them as mere boilerplate – don’t. They can be crucial in case of a disagreement.

When you are finished, read the Trust Agreement once again, this time all the way through. You need to understand the purpose and spirit of the document.

Or you could just bring it to us to decipher.

Hammerle Finley Law Firm. Give us a call. We can help.

Want to receive our monthly email newsletter or book one of our attorneys for a speaking engagement? Email LegalTalkTexas@Hammerle.com and let us know how we can help.

The information contained in this article is general information only and does not constitute legal advice.