A Trust is a rulebook for handling assets, and Trust Administration occurs when the rules are put into action.
Trust Administration begins with an event that triggers a provision in your estate plan, such as incapacity or death. The plan becomes executory, meaning that the individuals you designated in your plan documents must step into action and execute according to your instructions. To put it simply, the duties of a Trustee are considered to be the collection, management, investment, and distribution of trust assets. During that process, it is also important to keep detailed records. The principal source of Trustee powers and duties is the trust agreement itself, so it is important for the Trustee to be familiar with the terms of the trust.
Another important set of duties of the Trustee relates to tax matters. Depending on the situation, often times it is necessary to prepare a Federal Estate Tax Return (706), and possibly a 1041 Estate Return. It is always necessary to prepare a final Income Tax Return (1040). DBL will be able to assist with all of the tax matters for the estate. We recommend all Trustees meet with us to determine if and when a tax return is necessary. If a Trustee does not pay the necessary taxes or the incorrect amount of taxes the Trustee is personally liable. There are many instances when the Trustee files all of the tax returns, distributes the money and finds out more tax is owed by the estate. It is very difficult to collect money from beneficiaries to pay taxes and more often than not the Trustee wind up paying the tax himself or herself.
If someone exceeds their Trustee powers, they may be held liable for loss or damages to the trust estate. A Trustee must carry out all Trustee activities personally; however, they may hire attorneys, accountants, investment advisers, and others to consult with concerning the administration of the trust. Such advisors are usually paid through the assets of the trust, so there is normally no out of pocket costs to the Trustee. Sometimes the Trustee can be paid, it depends on the terms of the trust. Usually, the Trustee can reimburse himself/herself for out of pocket costs.
The Trust Administration process carries a lot of responsibilities. We will help guide your loved ones through the process with sensitivity and patience, working to make the process as straightforward and as efficient as possible. For example, the Trustee is responsible for paying the taxes and paying any additional taxes. It does not matter if all of the money is distributed to the beneficiaries. What does the trustee do?
Another issue during Trust Administration is dealing with creditors. What should be done? The answer is not so simple. There is a reason each debt of the decedent is sometimes sent to collections.
What is the attorney’s role in estate administration? DBL makes sure you are comfortable administering the estate. It is important that you understand the trust and understand that as the Trustee you have a fiduciary duty to the beneficiary. A fiduciary duty means that you have a relationship of special confidence and you need to treat the beneficiary like you would treat yourself.
We offer the following Trust Administration services:
- Review of the Trust document
- Explanation of Trustee responsibilities
- Gathering of all Trust assets
- Assistance to families in transferring the assets into the names of the beneficiaries
- Filing the 1041 Estate Return
- Filing the 706 Tax Return
- Making the Portability Election
- Collection of death benefits
- Creation of sub-trusts
- Dissolution of Trust
- Decanting Trust
- Ongoing support and representation services for executors, administrators and successor trustees of family trusts