A trust is a legal arrangement establishing parameters for the distribution of your estate after you pass. It also ensures your end-of-life wishes are followed and sets up who will handle your financial and medical affairs if you cannot do so. If you set up an irrevocable trust, you are the grantor and will probably choose a trustee to manage the trust.
If you established a living trust, you are likely the grantor and the trustee, managing the trust’s assets and making all decisions that impact the trust. However, when you die, your trust is in the hands of the successor trustee. Naming someone you trust implicitly is essential to upholding your trust as stipulated and as you intended. Furthermore, the successor trustee is charged with looking out for your best interests. Let’s look at what trust administration is, and why choosing a successor you know you can rely on is essential.
What Is Trust Administration?
Administering a trust involves all of the day-to-day management tasks such as filing tax forms and paying taxes, investment management and asset distribution after the grantor passes. A trustee is responsible for managing the trust according to the grantor’s intentions and completing time-sensitive tasks by the deadlines. The trustee has the fiduciary responsibility to manage the trust in the beneficiaries’ best interests. Trust administration is often complex, especially when there is more than one beneficiary or multiple investment types.
What Is the Process for Administering a Trust After the Grantor Dies?
Your state may require the trustee to wait a designated period before distributing the trust’s assets to allow creditors to come forth. Your trustee won’t be able to distribute the trust until your debts and administrative fees are paid and disputes are resolved.
When your designated trustee uses AmeriEstate’s trust administration services, we guide them through the process to ensure the trustee understands and follows the formal administration processes. If all beneficiaries receive their assets upon your death, the entire process can take up to 18 months. What is the trust administration process? It involves multiple steps that begin immediately after you pass.
Notify Beneficiaries
Your successor trustee must notify your beneficiaries of your death. Notification also includes providing information about the trust, including the date you created it and the trustee’s name and contact information. All beneficiaries should also receive a copy of the trust with the notification.
If your trust is revocable, it becomes irrevocable upon your death. Providing your beneficiaries notice establishes that the trust is now set, and any beneficiary must legally contest the trust if they disagree with the provisions. However, state law establishes a deadline for how long beneficiaries and others have to contest the trust.
Inventory Trust Assets
To understand what trust administration is, you need to consider asset inventory. Inventorying your assets is one of the successor trustee's most significant and challenging jobs. To make it easier, you should maintain a list of assets and account numbers, updating it as you add or remove assets. Additionally, the administrator needs to know where this list is and have access to it. The more organized you are with your files, the faster it will be for the trustee to settle your trust.
Procure Asset Titles and Account Access
The trust administrator's next step is obtaining asset titles and account access. This process can be time-consuming and frustrating, as the trustee will often run into roadblocks and a reluctance to turn over control. The administrator usually needs to supply a copy of your death certificate and proof that you named them your successor trustee. The trustee will also need to obtain asset values on the date of your death.
File the Will With the Courts
If you draw up a will, your trustee may need to file it with the court. If any assets in the will are not included in the trust, the court will hold probate proceedings for those assets. If you are in a state that allows pour-over wills, which move all inadvertently overlooked assets to a trust, the assets will go into your trust after the probate process. Therefore, it’s essential to maintain an accurate accounting of assets you own and want to include in the trust to prevent the time-consuming and expensive probate process.
Pay Debts and Taxes
Trust administration involves paying off your debts and filing and paying taxes. Though your successor trustee might not be legally required to notify creditors of your death, doing so might prevent challenges from creditors later. You should maintain a list of your debts along with account numbers to ensure the trustee can settle all your debts. Again, it’s essential to let your successor trustee know where you keep the list and give them access.
The trustee will also file tax forms, including forms 1040 and 1041. Form 1041 is a required reporting document for trusts. Whether the trust produces any income, your trustee will likely need to complete and submit these forms with your tax returns. The trustee will also pay any taxes due out of your trust holdings.
Maintain Trust Asset and Value Accounting
Throughout their time fulfilling the role as successor trustee, the individual you choose will also need to maintain an accounting of the trust’s holdings and values at least annually. The trustee will also need to provide beneficiaries with an accounting report.
Distribute Assets
Once the trustee completes all legal obligations, asset distribution can begin. Trust administration requires the administrator to distribute assets according to guidelines established in the trust. Distribution may be in one lump sum or staggered. The trustee may also be responsible for discretionary distribution, allocating funds as the trustee deems necessary based on the trust’s intentions. Once all assets are distributed, the trust is closed, and the trustee is relieved of duties.
How Can AmeriEstate Help?
AmeriEstate’s trust administration services support you and your successor trustee in the trust administration process. We provide information, education and coaching to ensure the trustee understands the process and what to do at each stage. We also offer the option to help with form and document preparation. Contact us today to learn more about the benefits of working with AmeriEstate.
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