A Trust is a tool used by many estate planning attorneys to help avoid probate, the legal process that takes place either during lifetime when an adult becomes incompetent and after a person dies to ‘settle’ the estate. Many wish to avoid probate due to the length of time it can tie up assets, as well as the fees involved. Trusts are legal arrangements in which a person, known as the Trustor, gives control of property to a person or institution, called the Trustee, for the benefit of beneficiaries. When a Trustor passes away, the property in the trust does not need to go through the probate process since the Trust is the legal owner, not the Trustor.
But when a Trustor dies, steps must be taken to not only comply with the state and tax law, but to change the title of the property held within the trust. These tasks make up the basics of Trust Administration, but the complexity varies based on the type of assets, value of assets and number of assets within the trust. Specific trust administration duties include:
- Contacting beneficiaries;
- Keeping beneficiaries informed;
- Gathering, reporting and investing assets;
- Paying debts;
- Notifying creditors;
- Filing tax returns; and
- Distributing assets.
Normally, during the estate planning process, a person creates a Living Trust and becomes their own trustee until they can no longer do so either due to incapacity or death. The trust designates a successor trustee to then take over the duties of Trust Administration.
A successor trustee is then responsible for administering the trust on the behalf of the beneficiaries. If a family member or trusted friend is named as the successor trustee, they may lack the time, resources or knowledge to administer the trust. An attorney whose practice is devoted to trusts and estates is able to assist the Trustee and take on the considerable duties of Trust Administration. They have the knowledge and expertise needed to help administer the trust during the time of high activity, which unfortunately, is also a grieving period for loved ones. It is important to remember that the trustee has a fiduciary duty during trust administration, meaning they owe the highest obligation to protect the assets in the trust and the interests of the beneficiaries. Therefore, getting the right advice is very important.