Your First-Time Trustee’s Guide to Trust Administration
Trust administration refers to the process of carrying out the wishes of the trustor in the event of his death or incapacity. A trustee is also assigned for such trust. He/She may be a family member or a close friend. A trustee is responsible in ensuring that the wishes of the trustor will be carried out accordingly. If you have recently found out that you are named a trustee of a trust, it can be quite stressful to facilitate trust administration especially if you don’t have any clue at all how to go about with it. Carl Dimeff helps you better understand the dynamics involved in trust administration including the duties and responsibilities of a trustee.
Basically, a trust is a relationship where a property is held in trust by one party for the benefit of another party. The one who creates the trust is the “settlor”, “trustor” or “creator”. The “trustee” is the party who holds the property for the benefit of another party known as the “beneficiary”. Typically, in a living trust, one may have more than one trustor, trustee, and beneficiary. For instance, if settlor is still alive, he also becomes the trustee and beneficiary. Once the settlor dies, a “successor trustee” will take over as the “trustee” who will have the fiduciary duty to carry out the instructions as imposed in the trust. Such relationship is evidenced by a legal document known as the “Declaration of Trust” or “Trust Agreement”.
You’ve probably heard that probate is a tedious, long, and expensive legal process that should be best avoided. It is a court-supervised procedure for collecting a deceased person’s assets including paying taxes and debts. Probate may take a year or even longer especially for those complicated cases. What makes probate expensive is the high cost of representative’s fees and attorney’s fees. A living trust will allow properties to avoid the hassles of probate and enjoy minimal court involvement at a lesser legal cost. In effect, it will quickly be passed directly and immediately to the named beneficiaries.
A living trust is one of the most effective estate planning tools. In California, probate is particularly more expensive not only because of the skyrocketing prices of real estate; but also because of the fee structure which is already set by statute and is therefore non-negotiable. As stipulated in Probate Code sections 10800 and 1081, probate fees are calculated as a percentage of the gross value of the estate, not on its net value. Other costs aside from executor fees and attorney fees may include filing fees and appraisal fees. That is why living trusts are a popular estate planning option in California for the last 20 years.
In a family trust, it is essential that it is administered correctly. Upon the settlor’s death, it is important that the Trust continues to operate according to the terms and conditions set. Here, a successor trustee will be appointed and will be deemed responsible for managing or settling the trust based on the terms set forth in the Trust Agreement. Some common duties and responsibilities of a trustee include, but are not limited to the management and protection of trust assets, distribution of the trust funds to beneficiaries, and preparation and payment of trust taxes.
Essentially, pour-over wills are a great addition to a living trust. They are legal documents which guarantee that the remaining assets of the deceased person will be transferred to the previously established trust upon his death. They help in ensuring that the living trust set is the only directive by which estate assets are transferred to the beneficiaries.
Indeed, trust administration can be complicated especially for a regular person. However, should you need any advice when it comes to dealing with the complexities of trust administration that are not covered in this page, it is best to seek out for legal expertise and contact a trust administration attorney before you make any significant decisions.