- October 21, 2022
- Posted by: Matthew Luedke
- Category: Probate & Estate Administration
Trust administration is the management of trust property by trustees that follows the trust document’s terms and is for the beneficiaries’ benefit after the settlor’s death. An attorney can help trustees with many required steps to implement effective administration.
If you or a loved one has recently passed with a trust in place, the next step is to then begin trust administration. These individuals must sit down and discuss trust administration procedures, so everyone knows their role when the time comes. Many lawyers make this process look simpler than it is at the time of signing, which can be incredibly dangerous if those named as Trustees do not fully understand what needs to happen upon the creator’s death.
We have found throughout the years that sometimes, our clients have unconscious ideas about how their trust will play out upon death. Clients occasionally think that the whole process is automatic and won’t need any additional help, or they aren’t aware that they’ll need an attorney and CPA to manage the trust. These are both widespread misconceptions.
What Does the Trust Administration Process Look Like?
If you are a trustee or family member of someone who has set up a trust, there are a few things you should be aware of in terms of duties and expenses.
For example, many people mistakenly believe that if husband and wife have joint trusts, the provisions automatically mean the trust will be split into sub-trusts. Not so!
There are many benefits to setting up a trust, such as avoiding probate (if the trust is adequately funded), saving on taxes, and protecting your assets from estate taxes. This can also provide protection for your spouse in the event of divorce or remarriage after your death.
The first thing that happens during a trust administration, if multiple beneficiaries are accounts are created or the assets need to be divided, is that an “administrative” trust with its tax identification number needs to be established. This is for bookkeeping purposes.
When the Grantor dies, the trust pays for his funeral and last illness expenses from estate funds, as well as any administrative bills like attorney or accountant fees. The successor Trustee sets up a new bank account to keep track of all these expenses.
Timeframe for Beneficiaries – Kennewick Trust Administration
In the trustee’s notice to the beneficiaries, they may want to include an estimated timeframe for distribution. Because distributing a trust can take many months, this will give everyone a better idea of when they might receive their inheritance.
The process of administering a trust begins with a mandatory notice to all beneficiaries and the settlors’ heirs. After receiving notice, the beneficiary has a certain number of days to file a trust contest, depending on the jurisdiction. If no contest is filed within this period, the beneficiary may forfeit their ability to file it.
Give the successor trustee the title to any property held in the trust so they can handle it according to what the settlor wanted. Record an affidavit with a certified copy of the death certificate against each piece of real property held in living trusts. This process moves property ownership from being under the deceased settlor’s name to new trustees.
It is advisable to help an attorney prepare a change of ownership form and the corresponding affidavit, especially if the trust involves real property transfers exempt from reassessment.
Once the real property has been transferred, the trustee must find all other trust assets, such as bank and investment accounts. The trustee then needs to transfer these assets into their name so that any income earned is reported correctly to the IRS.
Trust Administration – Trustees’ Responsibilities
The trustee responsible for the settlor’s estate must pay off any debts and liabilities as part of their duties for the administration of a trust. Large enough estates may have to submit a federal estate tax return, which can be complicated because both income and estate taxes might be due. To determine if a return needs to be filed, the trustee must first calculate the value of the decedent’s assets.
The trustee must file a federal estate tax return form if the value surpasses the designated amount. It is always best to consult an attorney to discern if filing a federal estate tax return is necessary.
According to most jurisdictions, the trustee must keep a close accounting of the trust’s funds. This means using the trust funds for settling the decedent’s affairs, monitoring all activity related to the trust, including distributions and deposits, and reading the document specifying how detailed this accounting should be. To determine their obligations, trustees should consult with an attorney as soon as they start administering the trust.
After the trustee has collected all of the assets, paid the debts, filed the tax returns, and fulfilled the liabilities, they can disperse the remaining trust assets among beneficiaries according to how it is ordered in terms of the trust document.
When Should You Pursue Help With Trust Administration?
Trust administration occurs when the original settlor dies, and estate planning is required. With the settlor no longer alive, it is up to the trustees to uphold the trust and act in the best interests of those who benefit from it. The trustees must notify the beneficiaries of any changes to the trust after the settlor’s death.
Talking to a lawyer is always helpful if you’re uncertain about administering a trust, either as the creator of the trust or as someone tasked with it. You can also read additional articles on our website to prepare you even further when it comes time to handle your estate after death.
Call our office at 509-328-2150 today, and we’ll connect you with an attorney in your area who can assist you with this highly complex process of trust administration and ensure your family is well taken care of. Alternatively, you can head over to our contact page and fill out our contact form, and we’ll get back to you as soon as possible. Also check out this article from FindLaw that goes into more detail on trust administration as a whole.