Trust Administration is the process of carrying out the wishes/plan of the creators of the trust when the creator(s) of the trust have become incapacitated or passed away.
When a trust is formed, the creator of the trust (the “trustor” or “settlor”) specifies how his or her assets are to be distributed at the time of his or her death. The trust will also specify a trustee – often a family member or close friend, or occasionally a corporate trustee or private fiduciary – to carry out the wishes of the trustor.
Upon the death of the trustor, the trustee will be responsible for a myriad of aspects of trust administration, including, but not limited to: providing notice and copies of the trust in sa specified format to all beneficiaries and heirs, notifying appropriate state agencies; filing an estate tax return, if necessary; notifying county agencies of the death of a real property owner; requesting a taxpayer identification number from the Internal Revenue Service; establishing a trust administration bank account to collect assets; mediating disputes between beneficiaries and family members not named as beneficiaries, etc.
This process is significantly more private, efficient (from a time and cost perspective) and straightforward than the court-supervised probate process. However, it is still a significant project/process that does require close collaboration between an estate planning attorney, financial advisor, CPA and the trustee-client.
The success of the trust administration process can be directly traced to the relevance/applicability of the estate planning documents at the time of the trust creators’ passing. Was the plan recently updated? Had the purpose and instructions for the plan been effectively communicated between the creators and the trustee? Between the creators and the beneficiaries?
Kaiser Law Group’s Legacy Program is designed to ensure that the process of trust administration minimizes conflict, expense and delay. We do that by proactively staying connected with our clients and their advisors so that the client’s assets are aligned with the plan, the plan reflects the client’s family situation and changing laws and enhances communication between the trust creators, the trustee and the beneficiaries.
Most trustees are unfamiliar with these procedures and the prospect of combining these tasks with the grief that loved ones are still experiencing shortly after the death of their loved one can be overwhelming, so it is critical to have the assistance of an experienced estate planning attorney during the trust administration process.
For example, one often-overlooked and misunderstood, but vitally important part of trust administration is ensuring that if any real property is being left to the children of the deceased trustor, that the trustee assist the children in maintaining the existing assessed value of the property for property tax purposes. Under California’s Proposition 58 (codified in Section 63.1 of California’s Revenue and Tax Code), children (and in some cases grandchildren) are entitled to exclude from reassessment the transfer of a parent’s primary residence plus up to one-million dollars of assessed value (typically lower than appraised value) of real property other than a primary residence.
Taking advantage of these benefits can save families tens of thousands of dollars in property taxes – especially on property that has been owned by the family for many years. There are a number of issues involved in complying with these regulations, some of which are complicated by the common scenario in which properties are to be transferred to children in equal shares. A qualified estate planning attorney can walk a trustee or family through these issues.
If you are the trustee or beneficiary of a trust and want to discuss what needs to be done to administer an estate in which you are involved, please contact Kaiser Law Group today.