If you’ve been designated to serve as the trustee for a living trust, it’s important to understand exactly what that job entails. After all, when the trust grantor passes away, it will fall to you to properly administer the trust to ensure that it objectives are met. In many instances, however, people agree to take on that trustee role without ever really knowing what they’re being asked to do. Your job can be easier when you follow these seven steps of trust administration.
Gather All the Relevant Documents
Once the grantor dies, your role as trustee begins. You should begin by gathering together all the decedent’s estate planning documents, as well as other important records like insurance policy details, pension plan records, retirement account statements, and so on. You’ll need multiple copies of the death certificate, which can be obtained from the county’s records office or the funeral home, as well as the decedent’s birth certificate, recent tax filings, and other relevant documents.
Review the Trust Terms
With the trust in hand, you should undertake a thorough review of the agreement’s terms. The terms of the trust will provide you with instructions that should inform your actions as trustee during the administration process. Pay careful attention to the level of discretion that the grantor provided, as well as any specific limitations that have been placed on your authority. At this point, it is usually a good idea to consult with a trusts attorney so that he or she can talk you through the agreement and ensure that you fully understand what you are required to do. That’s the best way to ensure that you meet your fiduciary duty and remain in compliance with state law.
Secure Trust Property
You will also need to secure all assets owned by the trust. If you were named as successor trustee for a trust under the control of the grantor, then you will need to retitle assets to ensure that you have legal control over everything. Take custody of all property, including oft-forgotten assets like safety deposit boxes, art collections, and brokerage accounts. If certain assets are in the custody of third parties, take possession of them in accordance with state law. An attorney can help you to identify and take custody of these assets.
Establish a Trust Bank Account
You will need to establish a bank account for the trust if there isn’t already one in existence. Remember, there will be debts to pay and assets to distribute, and that may require you to liquidate certain properties to free up capital for those purposes. Any income that is earned by the trust’s assets can be placed in its bank account. That account should also be used to settle debts, pay ongoing trust expenses, and distribute money to beneficiaries as directed by the terms of the trust agreement.
File for Any Death Benefits
You will need to use those death certificate copies to file for any death benefits that the estate may be entitled to receive. These can include life insurance policies, annuity earnings, pension and retirement account assets, and other benefits. As these funds are claimed and received, the proceeds should be placed in the trust bank account to be used as directed by the terms of the trust document. Be aware as well that many estates won’t receive life insurance proceeds, since most policyholders instead utilize those policies’ beneficiary designation feature.
Pay Debts and Expenses
The trustee also has a responsibility to ensure that all legitimate debts and taxes are paid. You will need to determine what debts, if any, the trust owes, and settle those debts with the creditors. An attorney can provide you with assistance during this debt resolution process, to ensure that all creditors are identified and dealt with properly. You may also need to contact a tax preparation specialist to ensure that the trust’s tax filings are taken care of. That includes any estate taxes that may be due for larger estates. At the same time, you will need to pay all ongoing expenses related to the trust.
Once those debts are paid and trust taxes have been dealt with, you should prepare an accounting of those activities and provide that record to beneficiaries. That will help to provide the transparency and accountability that is expected of any trustee, while also helping to ensure that the grantor’s heirs understand how the estate is being managed.
Distribute Assets in Accordance with Trust Terms
Asset distribution is the final step in many trust administration efforts, especially those in which the trust distributes all assets at once. For those trusts, you will need to follow the terms of the agreement and deliver trust assets to named beneficiaries by legally transferring ownership of that property to the designated heirs. Once that is done, you can prepare the final documentation that will enable you to formally close the trust.
If the trust agreement provides for distribution over time, however, then your role will be ongoing until the terms of the trust are fulfilled. This can often be the case in situations where you’re given discretionary control over expenditures – as would be necessary with many Special Needs trusts or spendthrift trust entities. In those situations, you simply continue to manage the trust assets and distribute them as directed by the terms.
Get the Help You Need
Trust administration is an awesome responsibility, and one that can be difficult to manage without at least some basic insight into the process. To prevent issues with liability that can arise when mistakes are made, it is important to take steps to guarantee that you have the guidance and assistance you need at every stage of the administration process. At Kulas & Crawford, our trust professionals can provide you with that help, and guide you through what could otherwise be a confusing and frustrating process. If you’ve been tasked with the responsibility of trust administration and recognize that you need help to ensure that you get the job done properly, contact us online or call us today at (772) 398-0720.
