To get a better grasp of the trust administration process, it is important to have at least a basic understanding of what a trust is and how it can function in the estate planning process. A trust is a legal mechanism frequently used in estate planning, not only to manage property assets during a person’s lifetime, but also to distribute assets after death. A trust can distribute estate assets to several different people or entities and also set conditions as to when and how much each beneficiary will receive. The type of trust used to distribute property after death is known as a testamentary trust. The trust is a legal entity and must conform to current state law. A properly established trust can supplement an existing will, but unlike a will, the trust need not be filed with the probate court.
There are normally three parties involved in establishing a trust :
- Trustor, Settler or Grantor – These are legal terms used to identify the person who is transferring legal title to property in the trust. To put it more simply, the trustor is the person who is establishing the trust.
- Trustee – This person controls and manages the trust. The trustee has the ability to manage all assets included in the trust. It is very important to name a highly reliable person as trustee. Additional restrictions can be placed on the trustee’s powers at the time the trust is established.
- Beneficiary – This is the person(s) who will receive assets named in the trust.
The person creating the trust (trustor) is often the initial trustee and has full management and control of all assets in the trust. If incapacity or death results in the inability to carry out these duties, the person named in the trust as the successor trustee will be the trust manager. The primary duty of the successor trustee is to deal impartially with beneficiaries, follow the trust terms and administer it according to current state law.
Duties of the trustee in administering the trust include:
- Filing an existing will with the local court within the required time frame after trustor’s death
- Formal notice to all trust beneficiaries and grantor’s heirs within the required time after trustor’s death
- File appropriate documents with the local County Clerk’s office if real property is involved
- Take control of and inventory trustor’s assets
- Take reasonable actions to pursue money that is owed to the trust
- Pay all creditors before beneficiaries receive any assets from the trust
- File all necessary tax returns and pay any taxes due
- Keep trust property separate from trustee’s personal property
- Take control of any real property and take action to prevent loss or damage
- Avoid transactions that could benefit the trustee personally
- Prepare an accounting detailing all financial transactions affecting assets
Once all of these steps have been completed and the required period of time has passed, the trustee is in a position to distribute trust assets to the named beneficiaries. The administration of a trust takes time, organization and patience and for this reason many trustees work with an estate planning attorney and/or other professional who is well versed in trust administration.
Santa Barbara Estate Services offers knowledgeable and experienced assistance to executors and trustees to handle the enormous amount of detailed work to properly take care of and settle estates. Please feel free to contact us for all matters dealing with senior issues, from finding and overseeing in-home care, locating appropriate assisted living care, handling the relocation, dealing with the client’s possessions, and attending to whatever related matters arise.
