If a loved one recently passed away and in their estate planning documents they nominated you as a Trustee of their Trust, you have now been handed the proverbial keys to the kingdom of that person, in order to administer their estate per the decedent’s, the person that passed away, wishes. This can be seen as an honor, a burden, and certainly a responsibility. So, what do you do now? Below are just the basic steps that trustees usually have to take to administer their duty responsibly. Seek help from a professional attorney for any of the below steps to avoid severe complications down the line.
1. ACCEPT OR DECLINE. You should know is that as a Trustee you have certain duties and obligations to the Trust and if you are not willing or able to do these duties you are permitted to decline being the Trustee and nominate a substitute trustee to take over this responsibility. However, Trust administration is also not a mystical magic procedure, plus you can hire specialists using Trust funds to help you administer Trust assets.
2. TRUSTEE OR CO-TRUSTEE. You should know whether you have been appointed as a sole Trustee or a Co-Trustee. Being a Co-Trustee means you must share responsibility of administering the Trust and cannot take any action by yourself without the Co-Trustee’s approval.
3. SEEK HELP. You should decide whether you should do things yourself or hire specialists. I advise everyone to immediately reach out to an estate planning attorney so you can set up a plan for action and administer accordingly. As a Trustee you have certain obligations to the Trust and you must perform them timely and prudently. Having an experienced attorney’s help will certainly benefit you and reduce potential issues and liabilities down the line. You and your attorney can split the tasks, assign tasks as appropriate, and agree on a gameplan. The attorney’s fees are usually considered “reasonable expense” in administration of the Trust and can be paid out of Trust assets.
4. REVIEW DOCUMENTS. Find, review, and confirm estate planning documents. This step is crucial as some documents may be imperfect or invalid and you may have to go to Court to prove the intent of the deceased. These documents will also indicate which properties should be in the Trust. This will also indicate whether there will be potential issues with Trust administration, who the beneficiaries are, what the fees are, and what powers are and are not granted to the Trustee. Finally, some assets might need to pass through a Probate proceeding if they were outside of the Trust.
5. PROVIDE NOTICES. As a Trustee you must provide certain notices to beneficiaries, potential beneficiaries, heirs, or other persons named in documents. You may also need to provide notices to certain creditors and file certain documents with the county if there is real property titled into the Trust.
6. NEW ACCOUNT. Create an estate account that is a separate entity for tax purposes. Reach out to any bank to do this. You should not use your personal accounts to collect assets, which may trigger difficult tax complications.
7. ASSEMBLE. Assemble gather and protect Trust assets and debts. This may be just a few personal items, or properties and accounts all over the country. Which will include a search, taking actual possession, securing the assets in storage or otherwise, changing bank accounts name into estate account.
8. APPRAISAL. Inventory and appraise all assets as necessary. This includes real estate, stocks, bonds, contents of safe deposit box, or any valuable assets.
9. MANAGE. Manage the property during the time of trust administration. Collect rents and income, file claims for insurance, manage cash in interest accounts, arrange for management of real estate, arrange for disposition or management of business interests, review investments.
10. RESOLVE expenses and creditor claims. This may include providing notice to all ascertainable and known creditors, to defend the estate from a lawsuit, to pay valid claims and expenses, and to negotiate creditor claims.
11. LIQUIDATE. Estimate which assets needs to be sold to pay for claims, taxes, and other expenses, and then take steps to liquidate assets to meet requirements. Certain assets should not be sold since they are either assigned to a certain beneficiary or are a gift that must be made prior to distribution.
12. TAXES. The decedent may owe taxes and decedent’s estate is liable for payment of those taxes. Hire a CPA to finalize the tax return during your administration, including federal and appropriate state taxes. Also, receive release from IRS for personal liability for decedents income, gifts, and estate taxes.
13. ACCOUNTING. Do final accounting of all assets, income, principal, liquidated assets, and everything in between. Accounting should be done throughout the administration period in order to keep track of all asset income.
14. DISTRIBUTE AND CLOSE. Distribute all assets according to the trust document language. File final paperwork with Courts if necessary. Obtain releases from beneficiaries. Make distributions to the beneficiaries and close the accounts.
This is just the view from the top of the many responsibilities and actions that must be taken. No two estates are alike, and each one may have a challenge which requires a unique resolution. In all cases, its prudent as a trustee to seek help from professionals to help you administer your duties correctly.
If you have been appointed a trustee, executor, or personal representative of someone’s estate, contact our offices to set up an appointment with an estate planning attorney: www.aristovlaw.com or (424) 259-3550