What is Trust Administration?

Trust administration involves overseeing the assets held within a trust. A trust is a form of legal property ownership in which an ownership interest in real or personal property is split. Trusts are commonly created as an estate planning tool, and the trust administrator then oversees the distribution of assets within the trust according to the wishes of its creator.

There are many different aspects to owning property. Mainly, property ownership involves the right of possession, the right of use, the right to transfer or sell property and the right to will the property to heirs upon death. When a trust is created, the ownership of the property is vested in the trust, which is a legal creation. The beneficiary of the trust is then vested with limited rights according to the terms of the trust; the beneficiary may have the right to use items within the trust but not to sell them or transfer them or may have limited usage rights and restrictions on what he may do with the assets held in the trust.

When a trust is created, in addition to naming the beneficiary or the person who is entitled to use the trust assets, a trustee must also be named. That trustee is responsible for trust administration. This means he is responsible for protecting the assets in the trust and ensuring they are used according to the wishes of the individual who established the trust.

The duties involved in trust administration vary depending on the nature of the trust created. It is common, for example, for a person to create a trust in which money is left to a child and then distributed to that child to pay educational expenses or when the child reaches a certain milestone. In such a situation, the trust administration duties involve ensuring that the assets are protected until the child reaches maturity and/or ensuring the money in the trust is used only for qualified educational expenses.

The trustee has a fiduciary duty when performing the trust administration. This means he owes the highest obligation to protect the assets in the trust and the interests of the beneficiaries. He cannot divert assets from the trust into his own name, put the assets at risk in any way or otherwise behave in such a manner that interferes with the purpose of the trust as determined by the trust's creator.