November 12, 2018
When a loved one has a trust and has passed away, administration of the trust will be necessary. The trust may either need to be distributed or continued for the benefit of its beneficiaries, depending on the trust terms. The person or people designated to serve as the Successor Trustee need to understand what should happen at the time of death of the person who creating the trust. While administering a trust is generally simpler than probating an estate, a trust is not self executing.
There are administrative tasks and expenses that revolve around trust administration that families and Trustees need to understand. The first thing that should happen during trust administration, is that an “administrative” trust should be set up with its own tax identification number. The trust, depending on how the estate planning has been set up, may pay for funeral expenses and possibly last illness expenses of the deceased, as well as ongoing bills and attorney or accountant fees. With the new tax identification number the successor Trustee can set up a new bank account in the name of the “administrative” trust to track all income and expenses. Meticulous record keeping is essential when administering a trust.
There are many other things that can happen in a trust administration.
Some of these things could include:
1. Notifying trust beneficiaries of the death of the Grantor and of the trust’s existence;
2. Upon distribution from the administrative trust, obtaining a tax identification number for any continuing sub-trusts;
3. Filing a final income tax return for the decedent;
4. Filing a trust income tax return each year for as long as the trust continues;
5. Determining if an estate tax is due;
6. Publishing a legal notice of the death of the Grantor of the trust;
7. Marshalling all of the trust assets, investing them safely, protecting them, and distributing them as appropriate;
8. Filing the decedent’s Will with the Probate Court;
9. Opening a bank account for the trust;
10. Paying last expenses of the decedent and valid debts;
11. Collecting life insurance proceeds;
12. Determining if a probate is necessary for any assets;
13. Notifying persons or institutions that they are the nominated Successor Trustee;
14. Notifying government agencies of the death;
15. Determining the status of all the decedent’s retirement accounts. Determine if the trust or sub-trust is a beneficiary. Take steps to take any required minimum distribution and maintain eligibility for stretch payouts;
16. Obtaining valuations on all property as of the date of death of the decedent;
17. Paying off valid debts of the Grantor;
18. Paying ongoing expenses of trust administration such as legal and CPA expenses, etc.;
19. Liquidating assets where necessary to pay off the debts of the Grantor;
20. Distributing the trust assets to the beneficiaries after all of the above has been completed.
The above list is not exhaustive. There can be many other tasks to accomplish depending on the particular situation. The above is just a list of common tasks that a Trustee might have to do. Every trust is unique. The terms, the beneficiaries, and the assets of the Grantor of that trust are going to be a unique mix that bring their own challenges. Therefore, it is important to hire experienced trust counsel to help with the administration of the trust. Missteps can be costly and result in personal liability to the Successor Trustee. If you experience a death in the family and need help, please don’t hesitate to call Upstate Estate Law, P.C. The Firm’s phone number is (864) 527-3144.