TRUST ADMINISTRATION

When the settlor (also called trustor) of a trust dies, the successor trustee must follow certain guidelines to distribute the trust assets to the beneficiaries.

The first step in administering a trust is to read the trust (and any amendments that were signed and dated) and the will (and any codicils that were signed and dated) from beginning to end. In some cases the entire trust will have been restated. In that case, the restatement replaces all of the provisions of the original trust and any amendments prior to the date of the restatement. The trustee must locate the original estate planning documents.

In order to take control of the decedents assets, the trustee must obtain certified copies of the death certificate.

The trustee should prepare letters to institutions who hold accounts, policies, or other assets in which Settlor had an interest in order to obtain necessary tax information. This will allow the Trustee to prepare an inventory listing all accounts in which the settlor had any interest on the date of his/her death, and to establish the value of assets on the date of death.

The trustee has a duty to provide notice of the settlor’s death to the Beneficiaries and Heirs at Law, to the Department of Health Services for the state in which the settlor resided, potential creditors, and to the county assessor in which the settlor owned real property.

The trustee must prepare a trust accounting with supporting schedules. The accounting shows the value of assets on date of death, plus any receipts since date of death, minus disbursements. This amount must equal the amount on hand at date of distribution.

Several other factors must be considered when administering a trust. The date of death value will be used in establishing new basis for income tax purposes, potentially eliminating capital gains tax on inherited assets, provided necessary rules are met. Preparing the inventory provides a complete list of assets and values so the trustee can determine whether tax issues exist, which would require further procedures, and whether assets have inadvertently been left out of the trust. If assets were held in Settlor's sole name with no beneficiary designation or with the estate as beneficiary, probate may be required.

THE MOYNIHAN LAW FIRM offers a very popular free seminar specifically designed to educate settlors and their successor trustees about the duties and responsibilities the successor takes on when acting as trustee. We encourage our clients to bring their named successors to one of our seminars to introduce them to trust administration. When the time comes, we are ready to assist successor trustees with the process of trust administration.