Trusts are often recommended as a way to avoid probate proceedings. There are usually two primary reasons clients want to avoid probate. First, they want to keep their estate planning documents and assets private. Second, they want to avoid the expenses associated with the probate process. Further, unlike wills, they are generally administered without probate court involvement, but there are still steps which need to be taken in order to carry out proper trust administration.
Trust administration is relatively simple when the person who created the trust (the “grantor”) are all alive and still administering the trust (as “trustee”). However, upon the death or incapacity of a grantor, the duties of a remaining or successor trustee can be very complicated. These duties are very serious: a trustee who fails to properly perform them can be held personally liable for breach of fiduciary duty.
Duties of Successor Trustees
Successor trustee duties can include (but are not limited to) the following:
- Notice to Beneficiaries. If a trust becomes irrevocable in whole or in part at a settlor’s death, the decedent’s heirs and trust beneficiaries must be notified of that fact and given an opportunity to request copies of the trust.
- Accounting. Trust beneficiaries have the right to a proper accounting of the trust, although such an accounting is generally not supervised by a probate court.
- Inventory and Appraisal. An inventory and appraisal is essential for protecting and preserving trust assets, and for properly accounting for and distributing those assets.
- Creating and Administering any Sub-trusts. Many trusts must be split into certain sub-trusts upon a grantor’s death.
- Decedent Income Taxes. Personal returns must be filed for the decedent.
- Fiduciary Income Taxes. If some or all of a trust becomes irrevocable (as is usually the case with a “bypass” or “credit shelter” trust), then the successor trustee must generally file fiduciary income tax returns.
- Estate Taxes. If a taxable estate is worth more than $5.43 million (for deaths in 2015), a federal estate tax return must be filed.
Contact one of our trust administration attorneys to learn more about the trust administration process and how we can assist the trustee to ensure proper trust administration.