Trust Administration

Unlike probate, Trusts keep legacy plans private. There is no court appointment or involvement when a person’s estate plan is properly structured and funded with a trust. But there is still substantial work to do in order to properly carry out the person’s wishes.

What Happens During Trust Administration?

Trust administration (for Living Trusts) typically starts when the Settlor of the Trust has died and the Trust has become irrevocable. At this point, whoever the Successor Trustee is takes up the role and begins the process.

The Trustee will need to find the Trust’s assets and gather them together to be administered and distributed. This includes locating real estate, investments, bank accounts, business interests, and other assets belonging to the Trust. The Trustee may also need to file beneficiary claims for assets like life insurance and retirement accounts.

The Trustee usually needs to notify the Beneficiaries of the Trust, as well. The Trustee generally needs to send a copy of the Trust to qualified Beneficiaries. The Beneficiaries of a Trust have a right to be informed about the administration of the Trust in order to protect their interests.

What Does a Trustee Need to Do?

The Trustee needs to follow the instructions in the Trust for how to handle the Trust’s assets. The position of Trustee is a fiduciary position, meaning the Trustee has a legal obligation to act solely in the interests of the Beneficiaries. This means a careful balancing of decisions and respecting all Beneficiaries’ rights under the Trust.

Typically, there will be an article in the Trust directing how to distribute assets and to whom. This may be the Settlor’s children, grandchildren, or other individual Beneficiaries named in the Trust Agreement. There may also be charities named as Beneficiaries.

The Trustee has a legal obligation to follow the distribution plan. This could be a simple outright distribution (a probate substitute), or it could be a long-term, structured distribution plan for minors. The Trust Settlor also could have made the Trust with distribution plans for a disabled Beneficiary, which will involve special restrictions.

Additionally, the Trustee needs to handle tax matters for the Trust. If there is income exceeding the applicable limit, a Trust tax return is necessary for that tax year. This adds some expense and likely requires assistance of a CPA, but the Trust’s affairs are still private.

If there are disputes with Beneficiaries, the Trustee also needs to work these out. Oftentimes, the Trustee and Beneficiaries can reach an agreement privately. But in some rare situations, the matter may have to be heard in the courts. The Trustee would then need to defend against the cause of action.