When a person passes away and a trust document is in effect, the trust will have to be administered according to the wishes of the settlor (originator) of the trust. Trust administration has many steps in it and often, an attorney is called upon to not only set up the trust, but to administer it when the time is appropriate.
Trusts are created specifically to avoid probate, which involves legally disposing of someone’s assets when they pass away. In probate, courts are called upon to make decisions that may or may not be in line with the desires of the deceased. A trust outlines these wishes beforehand, ensuring a much smoother transfer of assets.
Trust administration begins by notifying all beneficiaries and the settlor’s heirs. The beneficiary may file to contest the trust within a specified time frame. After that, they surrender the right to do so.
When a trust contains real property, the administrator bestows title to the successor trustee, transferring in a way that is consistent with the deceased wishes. By using a trust, no court fees should be incurred, and when a parent passes property down to a child, in many cases it may be exempt from property tax reassessment.
A trust administrator will make sure all bank accounts and investment accounts have been identified, and then transfer those assets into a successor’s name. Any income from this transfer needs to be reported to the IRS.
A trustee must also pay any debts and satisfy all liabilities of the trust as well. This includes income taxes and possibly estate taxes in cases where the estate meets certain thresholds. It is incumbent on the trust administrator to keep detailed records to be able to provide accounting proof related to the property if called upon to do so.
Once all of these obligations have been taken care of, the trust administrator can distribute the remaining assets in the trust and close out the trust if the situation dictates.
Raun Muntz O-Grady LLP serves clients in Los Angeles, Hollywood, West Los Angeles, Santa Monica, Beverly Hills, Anaheim, Orange County and communities throughout Southern California.