When someone has a valid trust that is funded with their assets, their estate may be able to avoid the public probate process.
Trust administration is the process of collecting, managing, and distributing a deceased person’s accounts, property, and other possessions that have been titled into the name of a trust.
Generally, after someone passes away, a family member or loved one comes forward with the trust. This person may be listed in the trust as the successor trustee or executor who will act as the fiduciary and manage the trust including distributions.
It can be a very stressful and emotional time and unfortunately, the trustee must make many decisions and carry out numerous tasks associated with administering a trust. Trust administration can be a daunting process, but we are well-positioned to help the trustee by providing guidance about the plethora of legal issues that arise when someone passes away.
Advice & Assistance
We can also provide advice and assistance to enable the trustee to competently complete the steps involved in administering the trust.
Administrating a trust involves numerous tasks, including:
- Locating the estate planning documents. Includes trust document, will, etc.
- Collecting other important documents. Insurance policies, real estate deeds, car titles, bank and investment account statements, tax returns, and more.
- Strategize with an attorney. Meeting with an attorney to plan the strategy for administering the trust and to prepare the legal documents needed to carry out that plan.
- Determine debts. Determining whether there are any debts to be paid, making a list of debts and creditors, and making arrangements to pay off the debts.
- Beneficiaries. Making a list of all the beneficiaries and heirs-at-law (i.e., the individuals who would be entitled to inherit from the deceased if they did not have estate planning documents such as a will or trust) and their addresses.
- Documenting all of the assets of the deceased. Preparing a list of all the deceased’s property, accounts, jewelry, and other valuables and obtaining a valuation of these items. The trustee will need to locate all property associated with the trust and, over the course of the administration process, will need to take the necessary steps to change the names on any bank and investment accounts. Every account and piece of property owned by the trust will need to be listed on an inventory, as well as the value of each account and piece of property as of the date of the client’s death. For some types of property, an appraiser may need to be hired to get an accurate value.
- Tax returns. Filing all the necessary tax returns and paying any taxes due. This could include the trust income tax return (Form 1041) and the estate tax return (Form 706), but also the final income tax return (Form 1040). An estate tax return may need to be filed even if there are no estate taxes for a surviving spouse to take advantage of certain tax exemptions.
- Maintenance. Maintaining the trust accounting, that is, keeping a record of all deposits, expenses, and distributions from the trust. Copies of this record will need to be provided to all of the beneficiaries of the trust.
- Understanding and ongoing administration. Gaining an understanding of which property and money are included in the trust, and ensuring that they are allocated and distributed to the beneficiaries in a way that reflects the intentions as expressed in the trust. It will probably involve the use of deeds or other transfer documents, which we as attorneys help prepare. In addition, the trustee will need to obtain signed receipts from each beneficiary when the transfer of property or money occurs.
This list may seem intimidating, but we are here to help guide the trustee through each step in the process.
Cost for Trust Administration
Trust administration is generally paid for by funds from the trust and the attorney’s fees are generally paid on an hourly basis rather than a flat fee. Normally, a retainer of funds is required to begin the trust administration process with an attorney.
We educate the trustee about the fiduciary duties that will be owed to the beneficiaries of the trust. In general, a trustee has a fiduciary duty to administer the trust solely in the interest of the beneficiaries and to deal with them impartially.
The trustee’s responsibilities include:
- Secure and safeguard all possessions owned by the deceased until they can be distributed to the beneficiary.
- Adequately communicate the status of the administration to the beneficiaries and provide pertinent information in a timely manner.
- Make sure that all outstanding financial and legal obligations of the deceased are resolved.
- Distribute the deceased’s possessions according to the instructions left in the trust document.
Additionally, the trustee cannot use any of the trust property for his or her own profit or for any purpose not expressly included in the trust.
Also, the trustee cannot enter into any transaction that would create a conflict of interest between the trustee and the trust or a trust beneficiary.
Family members will want their money ASAP, even if they are not entitled to anything. The trustee should not distribute any money until the trust has been administered.
California Trust Administration Checklist
Trust administration can be a complicated process. That’s why hiring an estate planning lawyer is best to help you through the steps.
Here’s a general overview of your responsibilities as a trustee during the trust process.
- Locate important documents – Find the estate plan, including the trust document, valid will, death certificate, and other essential documents
- Provide notice to trust beneficiaries and heirs – Notify beneficiaries and heirs of the trust administration
- Identify assets – Prepare a list of the deceased’s assets
- Identify outstanding financial obligations – Determine if debts or liabilities are owed, make a list, and arrange to pay them off
- File tax returns – Prepare, file, and pay any owed estate taxes
- Prepare trust distribution plan – Create a plan for distributing assets for the trust document. Beneficiaries must consent to this plan before implementation.
- Distribute trust assets – Distribute the trust assets and close the estate
Administering a trust is easier said than done. To avoid conflict at any step of the process, we recommend contacting a trust attorney for guidance.