Although sometimes the grantor of a living trust also serves as trustee, more often another individual or a financial institution is chosen to act as trustee for a living trust and oversee the management of it. Since the trustee has complete access to the funds or property that make up the trust, it is important to perform regular audits of the trustee to ensure he is acting in the best interests of the trust and carrying out his duties within the guidelines of the trust agreement.
Request all of the trustee's financial records related to the management of the living trust, including ledgers and any receipts issued by the trustee (i.e., rent receipts for leased properties included in the trust), as well as any receipts for expenditures the trustee may have made during the time period the audit will cover.
Carefully review every expenditure made by the trustee to ensure it was for the benefit of the trust and that it conforms to the guidelines and provisions of the living trust agreement. Note that any previously negotiated fees or reimbursements for the trustee's services are expenditures and should be audited but are considered expenditures made in the best interest of the trust.
Review the payments that should have been made to the trust during the audit time frame and ensure they were appropriately deposited into trust accounts. If desired, conduct a spot check on payments by contacting any person or business that made a payment and verifying the amount and date for each payment.
Obtain all records for living trust accounts held by financial institutions, such as bank accounts or investment accounts. Review these records.
Compare the trustee's financial records with the account records to confirm the trustee's records are accurate and complete. Additionally, obtain status information for any property deeds that are part of the living trust to ensure that no unauthorized transfers have been made.
Discuss the audit with the trustee after you've reviewed all of the information, and address any concerns or questions you may have, as well as any the trustee may have regarding the management of the living trust.
- The Living Trust Advisor; Jeffrey L. Condon; 2008.
- Fidelity Investments. "What Is a Trust?" Accessed March 6, 2020.
- American Bar Association. "Revocable Trusts." Accessed March 6, 2020.
- HG.org Legal Resources. "When to Consider an Institutional Trustee." Accessed March 7, 2020.
- AARP. "Choose the Right Executor or Trustee." Accessed March 6, 2020.
- American Bar Association. "Choosing the Executor or Trustee." Pages 10-11. Accessed March 6, 2020.