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Trust Administration

December 20, 2013 Douglas Davis

The administration of an estate is often characterized by confusion due to the lack of proper estate planning.  Unfortunately this occurs at the worst possible time when a loved one has died and the family is forced to deal with the burden of administering an estate.  A well designed trust based plan however, will ease the burden for your loved ones and provide them with the instructions needed to transfer assets to those you want to receive them.

When a trustmaker dies, the first thing to do is contact the attorney that designed and drafted the estate plan.   This should be done as soon as possible so that your estate planning attorney can schedule a meeting with the trustees and beneficiaries.  This is important to ensure that the planning that has been done is protected.  Those who plan their estates with Revocable Living Trusts or any other type of trust planning, have normally taken great care to provide specific instructions designed to carry out their wishes and protect their loved ones.

It is extremely important that family members do not sell, transfer, or mix assets without first having consulted with the estate planning attorney.  This is one of the biggest mistakes we see and it often results in a loss of tax planning strategies and thwarts the trustmaker’s desires. It often results in relational crisis as well, when assets are distributed without properly complying with the trust instructions. Financial decisions and the division of assets should never be made before consulting with an attorney.

At the initial meeting, the attorney will normally provide an overview of the trust provisions and  assist in bringing to life, all of the trustmaker’s instructions.  If the trust has been properly funded, the family will avoid the publicity, delay and expense of probate and funds will be immediately available to care for the surviving spouse or children.  The attorney will also review the steps that need to be taken to properly administer the estate.  Even with a trust there are tasks that need to be performed and work to be done in order to effectively carry out the terms of the plan.

Some of the questions your attorney will address with you are the following:

–         Who are the trustees?   What are their duties and what are the instructions that they are to carry out?

–         How will the trustees obtain access to financial information and assets in order to fully implement the estate plan?

–         How are the estates assets including investments, tangible property, business interests and real estate valued?

–         How are life insurance claims submitted?

–         How are retirement plan benefits (IRA’s, 401(k)’s) handled, and what decisions and actions need to be taken in order to roll them into the name of a surviving spouse or otherwise minimize tax liability?

–         What is the extent of any estate liability, are there any creditors, and how will they be paid?

–         How will taxes and the expenses of administration get paid by the estate?

–         How will income taxes be filed for the final year of the trustmaker’s life and how will the estate’s income tax returns be filed?

–         Will there be any estate tax and how will estate tax returns be filed with the IRS?

–         How will assets be ultimately distributed to beneficiaries of the trust plan?

These are just a few of the questions that will need to be answered and resolved by your attorney, financial advisor, insurance agent and accountant in order to work through the trust administration process.

The loss of a loved one is difficult enough without having to deal with the administration of the estate on your own.  Your attorney will be a valuable resource to you as you work through the process of administering the trust and will assist in avoiding court proceedings, taxes and other legal pitfalls.

A trust based estate plan and administration will give you peace of mind knowing that after your death, your loved ones will avoid probate and have their needs taken care of with as little disruption as possible.