Why You Need a Reserve of Money in a Trust

In a trust administration, a “reserve” is money that the trustee retains until certain conditions are met. The amount of money in the reserve is based on factors such as the value of the trust’s assets and its beneficiaries’ inheritance rights. Basically, a trustee should make sure that he or she has enough money in the reserve to cover any final expenses associated with distributing the trust property.

It is important to have a reserve of money in order to handle any little surprises that might come up after the court approval of an estate plan, such as IRS audits or unhappy beneficiaries. Or trustees may need the money set aside from trust assets to pay for professional services such as accounting, tax preparation, and legal advice. And the lack of a reserve fund could put the trustee in considerable financial jeopardy.

As a trustee, you will want to make sure that you have this reserve of money. In this video, Gary Winter, Managing Attorney at Lawvex discusses how to use the reserves and what types of scenarios you are likely to face in which you will need this reserve money.

If you are a trustee or represent a trustee and want more help with reserves, please contact us to discuss.

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