Page 52 - Successor Trustee Handbook

Your approach to paying expenses of the Trust should be similar to that of paying
your own personal expenses, namely, expenses should meet the general
standards of being “reasonable” and “necessary.” The Trust document may
provide additional guidelines as to the types of expenses that can be paid or
procedure for their payment. Reasonable and necessary expenses would
include things such as funeral, burial and medical expenses, credit card bills,
utilities, property and income taxes, and other basic living expenses of the Trustor
and beneficiaries (where the Trust provides for your payment of expenses on
behalf of beneficiaries). Reasonable and necessary professional fees, such as
for an attorney, accountant, financial advisor, property manager and appraiser
can be paid from the Trust as long as they relate to Trust property and activities.
You may also be entitled to pay yourself a Trustee fee, depending upon the terms
of the Trust document; you should see an attorney about the appropriate amount
and timing of its payment. The carrying costs of real estate, including normal
maintenance and repairs, can be paid by the Trust during the time the property is
held in the Trust. This may even include fix-up expenses if the property is to be
sold by the Trust prior to distributions being made to the beneficiaries. However,
you cannot pay for the renovation/repair or improvement of real property just
prior to its distribution to the beneficiaries; this should be an expense paid for
directly by the beneficiaries. If you personally pay any reasonable and necessary
expenses related to the Trust, or to the Trustor’s death (such as funeral expenses),
you may reimburse yourself but be sure to maintain detailed backup in case these
reimbursed expenses are ever questioned. Out of caution, you should consult
with an attorney before paying yourself any expense reimbursements. Third
parties may file creditor claims for bills unpaid by the Trustor. These may or may
not be paid by you depending upon the terms of the Trust; in most cases, they
can be paid as long as they are legitimate. It is your duty to determine whether a
creditor claim is legitimate and to dispute claims that do not appear to be so. If
you are concerned that there may be creditor claims outstanding that you do not
know of, and you may want to cut off the period for creditors to file claims, you
may want to publish a notice to creditors; you should see an attorney to help with
the decision and wording and placement of the publication.

If you have any doubt about whether or not to pay an expense from the Trust,
you should get the advice of an attorney first.

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