The loss of a loved one is a difficult and stressful time, and settling their estate often adds an additional burden on the individuals who cared about them. The process of trust administration is the means of settling an individual’s estate when they have a trust in place. This often alleviates a great deal of anxiety for those who are mourning.

The Complexities of Trust Administration

Oftentimes, when an individual signs a trust document, they are under the false impression that trust administration is a simple process. However, anyone who creates a trust should understand what should happen upon their death. When the individual has an understanding of the process, they can explain things comprehensively to their trustee or trustees. These individuals should be informed of what is expected of them when the time comes that they must administer the trust.

A reputable, experienced attorney will handle things properly with their client, so there are no unrealistic expectations of the trust administration process when they pass away. Once a trust is in place, the terms will not simply be carried out automatically upon one’s death; a CPA and an attorney will be needed to assist in trust administration.

Details of the Trust Are Often Misunderstood

Trustees and family members of the individual who creates a trust should be informed of the expenses and administrative duties involved with trust administration to avoid confusion. For instance, it is important to have a grasp on the reason for a married couple to create a joint trust with provisions that require the trust to be broken down into sub-trusts, commonly known as a Bypass Trust and a Survivor’s Trust.

Each party must understand that the primary purpose for doing this is to save on estate taxes, to protect the surviving spouse’s assets, and to protect the half of the estate belonging to the first individual to pass away in a divorce-remarriage scenario. An experienced trust and estate planning attorney can help the individuals involved to understand how this works, so there are no surprises when the day arrives. The basic concept is that a person or couple who sets up a trust does so to avoid probate, and estate tax savings may also occur as an additional benefit of putting the estate plan in place.

One of the benefits of setting up a trust and avoiding probate is that the probate process in California is time-consuming and expensive. It can take between 18 and 24 months and cost three to five times as much as trust administration. Additionally, trust administration is a private process, whereas probate is a public record.

What Happens in Trust Administration?

If the trust is set up to be allocated into sub-trusts for the beneficiaries, the first thing that will need to happen is the creation of an “administrative” trust with a tax identification number of its own for accounting purposes. One of the first expenses the trust must often cover is final illness expenses the individual may have accrued, as well as their funeral costs. In addition to that, the trust will need to pay CPA fees, attorney fees, and other bills that the deceased individual has left behind. One of the jobs of the trustee is to set up an “administrative trust” bank account and use that to track all expenses the trust pays for.

Once these initial details are finalized, there are various other duties involved with trust administration, which may include any of the following.

• Safely investing any assets the trust holds in a prudent manner during trust administration
• Liquidating any necessary assets and using the funds to pay off the deceased individual’s debts
• Paying any ongoing expenses for legal and accounting services involved with the trust administration
• Determining if any state or federal estate taxes are due on the individual’s estate
• Having all of the decedent’s property, including business interests and real estate, properly appraised as of the date of their death
• Finding information on the beneficiary status of the deceased individual’s retirement accounts. Many IRAs and 401(k)s offer steps that can be taken for a stretch out for the beneficiary.
• Notifying the Department of Health Services of the individual’s death, as well as the Department of Veterans Affairs when applicable
• Notifying all financial institutions and banks of the person’s death and that they are the nominated Successor Trustee
• Determining whether a formal probate must occur in the courts for any assets the individual had that aren’t included in the trust
• Collecting life insurance policy proceeds
• Paying any last expenses of the decedent
• Depositing the individual’s will with the County Clerk of the Court
• Gathering all of the assets together and protecting the trust’s assets
• Going to a local newspaper and publishing a legal notice regarding the death of the individual with the trust
• Filing an annual trust income tax return for the entire duration of the time the trust is open
• Filing a death tax return
• Filing the deceased individual’s income tax return
• Getting Tax ID Numbers from the IRS for the trust and any sub-trusts that may exist
• Notifying the beneficiaries of the trust and heirs at law of the individual’s death
• Distributing the assets of the trust to the named beneficiaries after all other necessary duties are completed

This list is extensive, but it is not necessarily complete. In many cases, there are additional tasks and considerations involved with the estate that must be handled as they arise, as every situation is unique. Since every estate is different, and every plan has its own stipulations, there are always going to be certain details involved with one trust administration that are not necessary for another. For this reason, it is essential to have a skilled trust attorney involved in the administration of the trust. Among other duties, a knowledgeable attorney can help a trustee avoid the stress and expense of any liability claims a beneficiary may make.

Turn to A Legal Professional With Experience

If you are honored with the duty of being trustee of an estate, the individual who created the trust obviously held you in high esteem. It can be a difficult process to handle without proper legal counsel, though. Paul V.L.Campo has over 30 years of experience, and he and his staff can help you to navigate the process with ease. Visit our website today to get the assistance you need.