Donnoe Law San Diego County
What is a Trust Administration?
A Trust Administration is the carrying out of the Trust's terms. In many cases a Trust Administration in essence replaces a Probate proceeding for people who had their assets in a Trust. Trust Administrations typically occur after the death of the Trustor or Settlor (the creator) of the Trust but can also pay out to Beneficiaries while the Trustor is still living.
What happens during a Trust Administration?
Trust Administrations differ depending on the type of Trust being administered and the terms within that Trust. However, a Trustee generally must marshal (collect) the assets of the Trust, address creditors which possibly include the IRS, perform Accountings and make distributions to the Beneficiaries. The Trustee must be mindful of their fiduciary duties imposed by the Probate Code and any additional restrictions or freedoms provided in the Trust instrument. Trustees of Special Needs Trusts (SNTs) must also comply with the rules and regulations of SSI, SSDI, Medical and other programs Beneficiaries may be taking advantage of.
What if a Trust Administration does not occur?
Depending on the circumstances Beneficiaries could be harmed and the Trustee may be held liable. For example, not Administering a Trust could defeat the purpose of the Trust by resulting in higher taxes. If a married couple creates a Trust that splits upon the death of the first spouse to take advantage of the Federal Death Tax exemption and the Trust is not Administered upon the death of the first spouse, there could be a loss of potential tax reducing benefits. This means Death Taxes might have to be paid which would otherwise have been avoided.
Is a Trust Administration Expensive?
Trust Administrations are not inexpensive because they are an involved process requiring a significant amount of time to complete. In most cases, Trust Administrations do save Estates a great deal of money compared to the same Estate having to go through the only other alternative, Probate. The size of an Estate typically correlates with the amount of work that must be completed during a Trust Administration. Another consideration when attempting to determine the cost of Administration is the duration of the Trust.
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