Trust administration is necessary when a trustmaker passes away. It can be a difficult process if you are not prepared or overwhelmed due to the information you need to learn in order to make sure it is done properly. Identifying the assets in a person’s estate as well as managing those assets in the way a will or trust directs is crucial to carrying out the wishes of a decedent.
What is Trust Administration?
Trust administration refers to the legal process around the organization of someone’s affairs after they pass away. It includes identifying their financial accounts, real estate, and other tangible property. It also involves settling debts, filing tax returns, notifying Social Security, and distributing their remaining assets.
A trust nominates a trustee who is responsible for managing the estate assets, and settling debts, filing tax returns and distributing the assets to the intended beneficiaries. In general this process is handled without court intervention, therefore, it is important to hire an attorney to help navigate the process so that all required steps are completed to avoid issues in the future.
The Nine Phases of Trust Administration
The administration of an estate ensures that the decedent’s wishes are adhered to, as well the payment of creditors and taxes, and the estate is wrapped up with no loose ends remaining. There are generally nine phases that you can expect when initiating a trust administration; they are as follows:
Get Acquainted, Review, Evaluate and Retain
The first step is to contact our office. We will schedule a complimentary appointment to meet with members of the decedent’s family. Generally, the person who has been nominated as the trustee is the person in charge, and will retain our services. We request that clients come to the meeting prepared to discuss any concerns, family dynamics and bring the following documents:
- All estate plans, trusts and wills;
- All other legal documents of the decedent;
- All known assets and liabilities;
- All family information including names, addresses and telephone numbers of decedent’s spouse, children, parents, brothers, and sisters.
Authority to Handle Estate Affairs Conferred Upon Person in Charge
During the initial meeting, the following documents will be reviewed, and if necessary, signed:
- Notices to heirs and beneficiaries as required;
- List of Trustee’s duties;
- Retainer Agreement;
- Required Internal Revenue Service forms to obtain EIN;
- Summary of the estate plan, people involved and their roles, and review the distribution plan;
- Documents verifying all names and addresses;
- Execution of Certification of Trust.
Assets Inventoried and Appraised
The Trustee will search for and gather all assets. The assets will be appraised and valued as of the date of death. The Trustee may be personally liable for any asset that was lost or incorrectly valued because of their actions. All assets should be titled in the name of the appointed Trustee.
Creditors Paid
Generally, after a thorough review of the decedent’s files and records, a determination is made identifying valid creditors and a Notice of Death is mailed to those creditors. Payment amounts, if any, are determined and then paid. The personal representative may be personally responsible for any debt that is not paid.
Taxes Paid
Final tax returns must be completed for the last year of the decedent’s life and at the end of the Trust administration. The estate can be closed after the IRS and California Franchise Tax Board approves the final tax returns.
File Any Necessary Tax Returns
At the federal level, estates over a certain amount are taxed. There may also be estate taxes imposed at the state level. The personal representative also needs to file the deceased’s last income tax return.
Failure to file federal and state (if applicable) tax returns can result in fines and interest.
Plan for Assets and Reposition for Distribution
After all details of the assets and liabilities are ascertained and reviewed, a plan for distribution can be prepared. This may be that real property is sold, stocks and bonds are sold, bank accounts collected and consolidated, and all other assets are collected and put into the control of the Trustee.
The plan is to reposition the assets for distribution in the most effective and beneficial way and under the terms of any estate planning documents established by the decedent. This may include distributions in cash or in king.
Prepare Reports and Accountings
The reporting and accounting phase requires a report of action of the Trustee and an accounting setting forth all assets on hand on the date of death, receipts, disbursements, and any distributions made during the administration. This report is required by law to be given to all heirs and beneficiaries. The report gives notice and a full report so that they know the administration was properly handled.
Distribute the Proceeds
It is at this point that final costs and fees are calculated and paid. Trust administration fees are paid on an hourly basis. Once all fees and costs are paid, the remaining assets will be distributed to the beneficiaries.
Receipts Finalized and Estate Closed
After all assets are distributed, the Trustee is required to obtain receipts of distribution from each beneficiary.
Note: the stages above are only a summary and not intended to describe each phase in detail. The phases may be worked on simultaneously. Clients will be informed of each states and the details that are required to complete each stage.
Consult a California Estate Planning Attorney
Trust Administration is an important part of finalizing a decedent’s estate. The process is oftentimes complicated and requires the Trustee to perform numerous tasks. Attorney Jessica Ward can provide effective legal counsel to alleviate uncertainty and confusion so that you can confidently administer the estate in accordance with the decedent’s wishes.
Contact us today either by using our online form or calling us at (925) 459-1777 to schedule a complimentary 30 Minute Consultation.