A trust can be an effective way to avoid probate and transfer assets. It can also provide financial protection to your family after death. However, many people have unrealistic expectations of how a trust will work when they die and don’t understand what happens during trust administration. It is crucial to understand the process, so you can ensure your family’s privacy is protected and your assets are managed properly.
The trustee is responsible for collecting and accounting for all assets in the trust, filing any necessary tax forms, ensuring beneficiaries meet certain requirements, and following the wishes set out in the trust document. They must also notify beneficiaries of the trust and make any changes that are required by law. The trustee must also keep records of any expenses they incur and seek compensation if applicable. This is a complex job, so it is crucial to be very careful and always seek the guidance of professionals that are experienced in estate planning, elder law, special needs planning, and accounting.
When choosing a trustee, it is important to select someone who will be able to remain objective and separate their emotions from the decisions that must be made. It is also recommended to choose a person with some level of experience in investing, finances, and managing money. If possible, it is a good idea to have co-trustees so that there are two individuals who can work together and provide oversight.
One of the first things that the trustee should do is assess the value of the assets in the trust and take an inventory. They should also contact creditors and other institutions to get information about the account. It is typically best to open a separate bank account for the purpose of holding these assets during this time. The trustee should also request a copy of the decedent’s death certificate and an affidavit of trust.
This document is used to prove that the trustee has authority to act on behalf of the trust. It is usually signed by the trustee and notarized, and it can be very helpful when dealing with banks, life insurance companies, or title companies. Using this form will help the trustee avoid unnecessary legal fees and speed up the process.
Once all of the assets are accounted for, they will be distributed to beneficiaries according to the trustor’s instructions. Often, this will be done in a lump sum, but sometimes the trustee may decide to distribute funds over a period of years. This can be a great way to prevent beneficiaries from spending the entire inheritance at once and can also reduce tax liabilities for the trust.
It is common for individuals to avoid going to court after a loved one’s death. The process of probate can be lengthy, expensive, and highly public. Trust administration is a less invasive alternative, but it is important to follow proper guidelines and ensure that you are in compliance with the law. It is always a good idea to consult with a qualified attorney and CPA for assistance.