Trust administration is comprised of proper funding of the trust upon creation and over time, making amendments to the trust as it is deemed necessary, administering the trust assets when it is appropriate, and avoiding litigation whenever possible.
The first and most fundamental step of trust administration is to ensure that the trust is properly funded initially and over time. Some trust attorneys and “trust mills” do not typically assist or adequately educate the client about how to put assets into the trust so that the trust is properly funded. The trust should have property schedules that identify the specific assets to be included in the trust.
In addition to listing the assets on the property schedules, certain assets, including real property and titled personal property assets, must be transferred into the trust. Real property is transferred into the trust by means of preparing and executing a grant deed where the individual owner(s) transfer(s) title to themselves as trustees of the trust. Care must be taken to make sure that the deeds are properly prepared. Further, accounts at financial institutions such as banks, savings and loans, brokerage firms, etc. must be transferred into the trust as soon as possible after the trust is created. This usually requires the trustee to present a copy of the trust or a trust extract to the financial institution, along with the completion of paperwork to transfer the accounts into the trust.
Once all the assets are transferred into the trust, the trustee must remember that his/her assets will change over time. Assets currently in the trust will be disposed of and new assets will be added to the trust. However, this does not happen automatically. The trustee must keep track of assets that are removed and added. Some assets that the trustee intends to add to the trust must be transferred into the trust just as was done when the trust was created.
Whenever the attorneys at the NewPoint Law Group, LLP, are asked to examine an existing trust, the first item in the review process involves determining whether the trust is properly funded. It is not unusual that the trustee has not included all assets as intended and a simple trust review will catch this oversight.
Change in Circumstances
A component of trust administration is to amend the trust when circumstances warrant it. A revocable living trust is a living document that can be changed when circumstances change. Anytime the trustor(s) wants to change who will administer the trust and/or wants to change who receives trust property, it is necessary to amend the trust. Although, there is a right way and a wrong way to amend the trust. A trust cannot be amended by marking it up. The law is very clear that it must be amended as specifically provided in the trust document itself or as otherwise required by law. This means that a written trust amendment must identify the portions of the trust to be deleted and reference to the new replacement language. The trust amendment must also be signed by the trustor and the trustee, and the signatures must usually be notarized.
Death of a Spouse in a Family Trust
A common type of revocable living trust is a family trust where a husband and a wife are named as trustors and trustees. Typically, a family trust consists of the main trust that is funded upon creation and at least two sub-trusts that are funded after one of the co-trustors dies. There are important requirements of trust administration that must be performed by the surviving spouse/trustee. This includes an allocation of trust assets between the survivor trust and the family trust. Depending upon the size of the estate, it may be necessary to obtain an EIN number from the IRS and to file a tax return for the trust. The surviving spouse should consult with an experienced trust attorney to review what needs to be done to administer the trust. The attorneys at the NewPoint Law Group, LLP, have significant experience in assisting the surviving spouse in proper trust administration in the months following the loss of a spouse.
In addition to tending to the immediate short-term issues, the surviving spouse needs to examine various long-term considerations. Examples may include appointing successor trustees, changing trust beneficiaries for the survivor trust, tax planning if appropriate, and ongoing efforts to ensure that all intended trust assets are funded into the trust.
Remarriage or Cohabitation
It is not unusual for the surviving trustee of a family trust to remarry or cohabitate. In this scenario, it is recommended that the trustee consults with an experienced estate planning attorney to review options that will facilitate harmony in family relationships, and protect assets for the children beneficiaries.
Death of the Surviving Spouse/Trustor
Hopefully, the trust has served its makers well and when the day comes when both trustors pass on, the designated successor trustee(s) are equipped to serve and perform their duties. Generally speaking, trust administration for the successor trustee involves paying creditors and taxes, liquidating the remaining assets, and distributing the proceeds of the estate to the intended beneficiaries under the terms of the trust. The most common need for legal assistance in trust administration is at this phase of the process. There is a checklist of tasks to be performed by the successor trustee, requiring the assistance of a qualified estate planning attorney to guide the trustee as necessary. The estate planning and tax attorneys at the NewPoint Law Group, LLP, have experience in providing the guidance needed to assist successor trustees in navigating a path to successfully conclude the trust administration and move on in life.
Trust Litigation Avoidance
The final phase of trust administration is usually the most contentious. The successor trustee is the “messenger,” delivering good news and sometimes bad news to family members and friends who may be surprised by the intent of the trustors in distributing the remaining assets of the estate. An experienced trust litigation attorney should be consulted if there is the potential for a trust dispute at this phase of the process. Unfortunately, there is a very short statute of limitations to challenge the trust; but, proper notice must be given, necessitating the assistance of an experienced trust attorney. A successor trustee does not and should not have to be subject to ridicule and abuse when other family members make it difficult to administer the trust. Often, an attorney can act as a buffer to allow cooler heads to prevail so that litigation is avoided, and instead ends in amicable resolution. Conversely, if the trustee becomes obligated to resort to litigation, he or she is usually authorized to retain an attorney to defend both the trustee and the trust.
To achieve a successful trust litigation outcome, it is essential that the trustee retain a qualified attorney, who will provide needed guidance to ensure the trust is properly administered and that the trustee performs all required fiduciary duties. Trustees who are experiencing difficulties in administering the trust are encouraged to consult with the attorneys at the NewPoint Law Group, LLP.
Finally, for trust beneficiaries who believe the successor trustee is not treating them equally and fairly and is not communicating or making distributions in a timely manner, a consultation is worth the time and effort to gain an understanding of the mandatory duties of a trustee. These duties entail some fiduciary duties and obligations. Often, a phone call or letter may cause the trustee to consult with an attorney and change course in order to correct errors or misunderstandings. However, in those situations where a successor trustee is unwilling to recognize or correct ongoing breaches of fiduciary duties, the attorneys at the NewPoint Law Group, LLP, are prepared to vigorously litigate and serve as a forceful advocate for the rights of the harmed trust beneficiaries.
How We Can Help with Your Trust Administration
If you need assistance to properly fund a trust, prepare a trust amendment, or administer the assets of a trust, we can guide you every step of the way. Please contact the NewPoint Law Group, LLP, today for a consultation by calling 800-358-0305 or messaging us online.