A trust is established when a person, called the “Grantor” or “Settlor,” transfers ownership of assets to the care of another individual or entity, called the “Trustee.” The trustee will manage the assets for the benefit of an individual or group of people, called the “Beneficiary” or “Beneficiaries.” If the settlor of a trust has passed away and you have found yourself in the position of being appointed the successor trustee, you now face the responsibility of trust administration. Administering a trust is often complex and requires attention to detail, diligence, and a thorough understanding of your obligations. There are many requirements as you navigate your way through the administration of the trust and the Florida Trust Code. Failure to adequately perform your these trustee duties may cause significant issues with creditors, beneficiaries, the Internal Revenue Service, and the law. If you are a successor trustee, you should consult with an attorney right away to make sure you understand your legal rights and responsibilities in this important role that you are undertaking. The knowledgeable trust and estate planning attorneys at The Law Offices of Jeffrey A. Herzog, P.A. are here to support you through the trust administration process and ensure that you successfully fulfill all of your obligations.
Responsibilities of Trust Administration
Many people choose to utilize trusts in their estate plans. They provide several unique and value benefits including:
- Reducing tax liability
- Protecting property of the estate
- Avoiding probate
- Protecting your assets from creditors
- Privacy (avoiding public record)
- Planning for Children and Disabled Adults
When the settlor of a trust passes away, the successor trustee will oversee the administration of the trust much like the personal representative oversees the administration of the estate as prescribed by the decedent’s will. Unlike probate of a will, a trust administration is not overseen by a court and, therefore, it is not a public process. Despite this difference, the trust administrator still has many of the same duties as the personal representatives. The responsibilities of the successor trustee include:
- Getting trust assets in order. The first duty of the trustee is to organize and account for the assets held in the trust. This includes determining all trust assets such as bank accounts and other investment accounts. The trustee must change the title of all accounts from the decedent to the successor trustee. If there is real property, the title needs to be passed to the successor trustee and handled according to the settlor’s wishes. The trustee will also need to acquire the trust’s federal tax identification number to correctly report income earned by the trust to the Internal Revenue Service. The trustee also needs to record the values of all trust assets as of the date of the decedent’s death. The trustee has the duty to preserve the trust assets during the trust administration and must comply with the “prudent investor rule.”
- Make sure that all of the decedent’s creditors are paid. Creditors have two years to make a claim against trust assets. This is a significant amount of time that the trust beneficiaries will have to wait until final distributions from the trust can occur. If the distribution is made before creditors are paid the trustee risks having to pay those creditors from the trustee’s personal funds.
- File required tax returns and ensure payment of taxes. If the trust is sufficiently large, both estate and income taxes may be owed by the trust. To determine whether it is necessary to file a federal estate tax return for the settlor, the trustee needs to calculate the value of the decedent’s estate to determine if the current federal exemption is exceeded. We often advise that the trustee consult with a certified public accountant.
- Duties to the beneficiaries. The trustee must adhere to the settlor’s intent for the trust and must manage the trust for the benefit of the trust’s beneficiaries.The trustee must prepare and file accountings of the trust assets for the beneficiaries. The administrator must also make distributions to the beneficiaries or establish testamentary trusts as prescribed by the terms of the trust.
Reliable counsel for Trust Administrators
A trust administrator is tasked with several very important tasks that must be carried out within prescribed timeframes. Failing to do so may subject the trustee to litigation. If you are the trustee for a trust, contact the dedicated probate and trust administration attorneys at The Law Offices of Jeffrey A. Herzog, P.A. Our attorneys are here to support you through the trust administration process.