Your Journey through Trust Administration

This is something that people think they can do on their own A lot . I see questions about this often and I see people attempting to tackle it on their own and I beg of you , please consult with an attorney before you try to take this on by yourself . So I get a lot of questions about how to move forward after somebody dies with a living trust in place .

This information is really designed for trustees and beneficiaries of a trust that is not intended to last for years and years and years . Most trusts provide that its beneficiaries take the property outright and free of trust and do not take longer than around a year to administer .

And even if it is not going trust or trust that's going to last for years and years and years , this information is going to be helpful to you anyway . Trust administration is the process of managing and distributing trust assets . Trust assets are those assets that are titled in the name of trust .

For example , when you see an asset titled like David Rose , trustee of the Rose Trust , dated May 5th 2020 , you have yourself a trust asset . If an asset is described really any other way , it is not a trust asset . If the same asset is titled just David Rose , it will not come under the ambit of the trust instrument .

This can come as a shock to some trustees or beneficiaries thinking that an asset is a trust asset but learning it's not , because the outcome of that asset or how that asset is distributed after the decedent dies may not be consistent with what you think the decedent wanted .

For example , should the family home be titled as David Rose and Moira Rose as joint tenants ? after David dies , the home was transferred as a matter of law to Moira , even if David's trust instrument provides that his assets , his trust assets , should be split between David's children .

This can get even more complex if David and Moira die at the same time , or if David lists the home as a trust asset but never signs or records a trust transfer deed As an offshoot . This is why you should consult with an estate planning attorney when you draft your trust .

Assets of a trust can include real property , like we just talked about , personal property , such as jewelry and other belongings , bank accounts and investment accounts . The trustee is responsible for managing the assets within the trust , including investing the assets , paying any bills or debts owed by the trust and , lastly , distributing assets to the beneficiary .

The trustee has a lot of responsibility is this is why I always tell my clients that they are not obligated to serve as trustee . Make this . I want to make this clear . You can say no . Please know that if it that it really is a lot of work In fact , so much work with their professionals whose sole profession is to act as a trustee .

A Provocable living trust does not go through probate , which can save time and money for the beneficiaries . However , the probate court still plays a role in the trust administration process . If the trustee fails to properly manage the trust , a beneficiary can petition the court to remove the trustee or take other legal Action to protect their interests .

Here are the five steps that a trustee must take , their general guideposts . Every case is different and this is general information and not legal advice . Step one notifying the beneficiaries and taking inventory of the assets After the decedent dies .

The very first thing a trustee must do is Contact the errors and beneficiaries to let the errors and trust beneficiaries know that the trust is now Irrevocable and that you are now trustee . There is very specific language that must be used letting the beneficiaries and errors know that they have x number of days to bring An action to contest the trust .

You'll note that I'm not addressing this letter to just the name beneficiaries of the trust . A trustee must send this letter to all errors at law , including anyone who may not even be mentioned in the trust . This is because , one , the law requires it and , two , it's short , mr , time limit for any error to contest the trust , from years to months .

This could include an error who was left out , who expected an inheritance , so that person is going to be real jived up to file a lawsuit . You want to shorten the time limit as much as possible . It's a very good legal strategy . The trustee must create an inventory of all the assets held in the trust . This includes identifying and valuing all assets .

This includes , like I mentioned , bank accounts , investments , real estate and personal property . Personal property is often overlooked , but if you've reason to believe that grandma's jewelry or art collection is worth over $500 , it really should be appraised At this time . The Trustee should , of course , identify and are debts or bills owed by the trust .

You'll notice that's trustee that sometimes these bills or debts take a while to come into you . You should always be keeping an eye on the decedent's mailbox and keeping an eye out for any debts or evidence of any bills owed Can often take a while . For any real property or , like I mentioned , personal property worth over $500 , the property should be appraised .

Step two pay bills and debts . The trustee must pay any bills or debts owed by the decedent . This includes expenses related to the administration of trust or , excuse me , of the trust , such as legal fees and accounting fees , and they must pay any outstanding debts owed by the decedent . Step three reappraise and file tax returns .

The trustee is responsible for filing any required tax returns for the trust . This includes income tax returns and estate tax returns . If applicable , the trustee should work with an accountant or tax professional to ensure that all obligations are met . If the trustee is also the executor , then they are also responsible for filing the last personal income tax return .

The property should also be reappraised at this around this time , which is around six to nine months post date of death . Step four fiduciary accounting . This should occur no later than one year after the decedent's death . The trustee must maintain accurate records of all transactions for the trust .

This includes keeping track of all income , expenses , gains , losses and distributions . The trustee must prepare a fiduciary accounting report , which is a detailed report of all financial transactions within the trust to present to all beneficiaries . The purpose of the accounting is to disclose all the activity of the trust and seek approval of all those transactions .

If the beneficiaries informally approve it , wonderful , a probate court is not needed to get involved . But should they not approve it , then a court order is necessary and your attorney can seek a petition for court approval of the accounting . Step five distribute assets to the beneficiaries and distribute the cash reserve . This happens at around 12 months in .

Once all bills and debts have been paid and tax returns have been filed , the trustee can distribute the assets . The trustee must ensure that all distributions are made in accordance with the trust document and any applicable law . The trustee should also ensure that a cash reserve is set aside . Therefore , not all assets should be distributed at this time .

The trustee should set aside enough money to pay for any outstanding tax liability that could arise up to three years and beyond after filing a return , depending on the circumstances of the decedent's tax returns . The trustee should also set aside enough money to pay for tax filing , preparation and legal fees .

In addition , depending upon the situation involving the trust and the decedent , it might be necessary to set aside additional money for any potential liability faced by the trust . The cash reserve should really sit for about 12 to 18 months at least . After that period , the trustee can safely distribute the reserve to the beneficiaries .

Trust administration can be a complex process , but with the right guidance it can be navigated smoothly . Hiring an experienced attorney can help ensure that the trustee fulfills the responsibilities , does not end up with personal liability or give beneficiaries , irs or other creditors any reason to take valid legal action against them or the trust .

And , of course , you want to ensure the beneficiaries receive the rightful share of the assets . By understanding the trustee's responsibilities , the role of the probate court and the distribution process , the trustee can work through the administration smoothly and ensure that they can walk away without a new threat or interpretation . Thank you and see you next time .

Uh huh .