A Trustee Can Manage Your Property Without Becoming the Owner

One of the most powerful benefits of a Revocable Living Trust is that you can give someone you trust the legal authority to manage your property without simply giving that property away to them.  This distinction is important.

People sometimes add a child, relative, or friend to the deed to their home or make that person a joint owner of a bank account because they want someone to be able to help them if they become sick, incapacitated, or unavailable. But making someone an owner can create unintended consequences. You may be giving that person actual ownership rights in your property and potentially exposing the property to issues involving that person’s creditors, lawsuits, divorce, or death.

A Living Trust offers another option: Appoint a Trustee to manage the property under written legal instructions.

What Is a Trustee?

Under O.C.G.A. § 53-12-2(16):  “Trustee” means the person or persons holding legal title to the property in trust.  A Trustee is the person or institution legally responsible for holding and managing property that belongs to a trust. A Trustee is a fiduciary, meaning the Trustee is entrusted with property and must administer it according to the terms of the trust and applicable law.

The Trustee may have authority to manage bank accounts, investments, real estate, businesses, rental properties, and other assets owned by the trust.  With a typical Revocable Living Trust, you can initially serve as your own Trustee and continue managing your property just as you did before. You can then name a Successor Trustee to step in if you become incapacitated, resign, die, or another event specified in your trust occurs.

The Successor Trustee receives authority to manage the trust property but that does not mean you simply gave that person your property.

Georgia Law Imposes Duties on Trustees

A Trustee does not have unlimited freedom to do whatever he or she wants with trust property.

Under O.C.G.A. § 53-12-240, once a person accepts the trusteeship, the Trustee must administer the trust in good faith and in accordance with the trust’s provisions and purposes. Georgia law makes these statutory obligations additional to applicable common-law duties.

Georgia law also imposes a duty of prudent administration. Under O.C.G.A. § 53-12-241, a Trustee must exercise the judgment and care of a prudent person acting in a similar capacity, taking into consideration the purposes, provisions, distribution requirements, and circumstances of the trust. A Trustee managing investments is also subject to Georgia’s prudent-investor requirements.

Georgia further addresses conflicts of interest. O.C.G.A. § 53-12-246 generally requires a Trustee to administer the trust solely in the interests of the beneficiaries, subject to the statute’s permitted transactions and the terms and circumstances of the trust.

These duties are important because a Trustee is a fiduciary, not simply another owner of your property.

Trustees Can Be Required to Account for What They Do

Trust administration also creates accountability.

Under O.C.G.A. § 53-12-243, Georgia law provides circumstances in which a Trustee must provide information, reports, and accountings concerning trust assets, liabilities, receipts, disbursements, and the Trustee’s administration of the trust. The statute contains important qualifications based on the type and terms of the trust, including special rules concerning revocable and irrevocable trusts.

These requirements can provide another layer of protection that does not necessarily exist when you simply make another person a co-owner of your property.

During Your Lifetime, You Can Remain in Control

A Revocable Living Trust does not normally require you to surrender control of your property.

You can generally serve as the Trustmaker, Trustee, and beneficiary of your own Revocable Living Trust. You can continue buying, selling, investing, refinancing, and managing trust property according to the terms of your plan.

Georgia law now specifically addresses duties during the lifetime of a settlor who has retained the power to revoke a trust. Under O.C.G.A. § 53-12-46, while the settlor is alive and the power of revocation remains in place, the Trustee’s duties are generally owed exclusively to the settlor.

Your trust can then identify exactly who takes over and under what circumstances if you can no longer manage the property yourself.

This Can Be Especially Important During Incapacity or an Extended Absence

A well-designed trust is not only about what happens when you die.

Suppose you own a home, rental property, business, or financial accounts and suddenly become incapacitated or are unable to personally manage your affairs. Instead of transferring ownership to someone else in advance merely so that person can “help,” your trust can designate a Successor Trustee and give that person defined authority to manage the trust property for you.

The Trustee may be authorized to collect rent, pay expenses, maintain property, handle banking and investments, communicate with financial institutions, and buy or sell assets when authorized by the trust.

Management authority can be transferred without unnecessarily giving away beneficial ownership of your property.

Be Careful When Choosing a Foreign Trustee

There is also an important federal tax consideration when choosing Trustees, particularly when family members live outside the United States.

For federal tax purposes, a trust is generally considered a domestic trust only if it satisfies two requirements: a U.S. court must be able to exercise primary supervision over administration of the trust, and one or more U.S. persons must have authority to control all substantial decisions of the trust. 26 C.F.R. § 301.7701-7.

For this reason, when naming Trustees or Successor Trustees who live outside the United States, the plan should be reviewed carefully to avoid unintentionally causing a domestic trust to become a foreign trust. It is often prudent to ensure that appropriate U.S. persons—including a U.S. citizen or qualifying U.S. resident where applicable—retain control over all substantial trust decisions. Simply naming one U.S. Trustee is not necessarily sufficient if a foreign person has authority over a substantial decision.

Give Someone Authority—Not Your Property

There is an important difference between saying:

“I am going to make you an owner of my property so you can help me.”

and:

“I am appointing you as Trustee and giving you legal authority to manage my property according to my written instructions.”

A properly prepared Revocable Living Trust can allow you to remain in control while you are able, designate someone you trust to step in when necessary, impose fiduciary duties on that person, and establish exactly what happens to your property after your death.

You do not necessarily need to give someone your property in order to give them the authority to help you manage it. A properly structured Living Trust can provide management, continuity, accountability, and protection—while keeping your wishes at the center of the plan.

At the Bowman Law Firm, our Norcross trusts attorneys can help you evaluate your options and move forward with confidence. Reach out to us today for a consultation and to move forward.