ADMINISTERING A TRUST

 

Step 1: Start gathering all official documents and records.

 

1. The first step in administering a trust is to gather all official documents and records you will need during the process. Collect all estate planning documents and other important records of the deceased, including:

 

Last will and testament, trust documents, including any trust amendments and restatements, and the Certification of Trust;

Several certified copies of the death certificate for the decedent from the funeral home or vital records office;

Life insurance policies, annuity contracts, pension plan statements, IRA and 401k account statements, and related policies and retirement plan documents;

Birth certificate and social security number;

Marriage license, divorce decree, and property settlement agreement if applicable;

Most recently filed federal and state income tax returns;

Documentation of military service, such as serial number and veteran’s discharge papers;

Trust transfer deeds, other real estate deeds, and title to vehicles; and

Financial statements, account statements, and other financial records.

2. Review the trust agreement thoroughly for information regarding your powers as trustee and the limitations on your authority. Post executor bonds if required. Consult a trusts and estates attorney to ensure you fulfill your duties as trustee in accordance with applicable law.  If the living trust contains marital deduction provisions or bypass trust provisions, it is essential to consult an attorney and a tax professional before taking any action regarding trust property.

3. Secure all trust property. Review the contents of any safe deposit boxes held in the name of the trust. Create an inventory of property, accounts, and other assets in the trust.

4. Meet with an attorney and tax advisor. If the trust property includes stocks, bonds, limited partnerships, a business, rental property, or other investments of significant value, consult a financial planner in addition to an attorney and tax professional. See find a financial planner.

Manage trust investments prudently. You may need to open a brokerage account or other investment account to hold securities owned by the trust or invest trust funds. A trustee should get professional assistance if necessary to properly perform the  trustee investment duties.

5. Establish a bank account for the trust. For a list of steps involved in opening an account for a trust, see our section on how to open trust account.

6. Apply for insurance proceeds, employment compensation, government benefits, and other types of benefits that are payable to the trust, such as annuity contracts, death benefits on a life insurance policy, and IRA’s, 401k’s, 403b’s, 401a’s, and pension plans.

7. If you plan to seek beneficiary consents, waivers or releases, consult an attorney about drafting enforceable language based on applicable state law. Review our article on Trust Beneficiary Release.

8. Maintain accurate records, accounts, and financial statements regarding all trust income, expenditures, sales, transfers, and transactions. You will need these records to prepare a Trust Accounting Form.

9. Review the grantor’s estate planning documents to determine if he or she disinherited an heir or left only nominal amounts to heirs that may have expected more substantial inheritances. Identify any potential trust dispute or claim that may be brought by a disgruntled heir. See will and trust disputes. Consult an attorney regarding the best way to handle any potential claim against the trust or the trustee.

10. Pay debts and expenses regarding trust property. Pay federal, state, and local tax obligations of the trust and file required tax returns with the help of a tax advisor. For a list of tax returns you may be required to file, see tax returns due.

11. Complete a trust accounting and provide the accounting to beneficiaries if required. See living trust accounting. If a distribution is being made at the same time, the trustee may enclose the accounting report with the trust distribution letter.

12. Distribute trust income or property to trust beneficiaries according to terms of the trust agreement. Complete transfer deeds and other change of title documentation. Document distributions to beneficiaries in a formal letter indicating that a final distribution has been made. For an example of how to write a final distribution letter to beneficiaries of the trust, refer to our Trust Distribution Letter form.

13. Prepare documentation closing the trust. Completing the paperwork to close a trust is an essential but often missed step in the trust administration process. For a list of steps, see our checklist on how to end a trust.

Step 2: As estate representative, start gathering information and fulfilling your duties.

As an estate representative, there are a number of preliminary duties you have:

  • Take possession of the property and safeguard it until everything is distributed and any debts are paid. For example, if the assets are in the decedent’s house, make sure the house is secure, and store any important papers and valuables in a safe place.

  • Find the will, if there is one.

  • Get certified copies of the death certificate. You will need them for many of your duties.

  • Collect any assets and death benefits, if you can, such as bank account funds, life insurance proceeds, annuity benefits, Social Security death and survivor benefits, veteran’s benefits, etc.

  • Figure out who all the heirs and beneficiaries may be.

  • Check out any safe-deposit boxes for important papers or other valuables.

  • Collect the decedent’s mail, to make sure you don’t miss anything important.

  • Cancel credit cards and subscriptions.

  • Manage “digital assets” (like online accounts, photos and documents stored on line, etc.). You may need to get email access for important information.

  • Notify the Franchise Tax Board

  • Notify the Social Security Administration if the decedent was receiving monthly social security benefits.

  • Prepare the decedent’s final income tax returns.

Important: These are just some of the steps you will have to take. Make sure you are doing all you need as estate representative to take care of the estate and help make sure it gets distributed correctly.

Step 3: Figure out who the heirs and beneficiaries are. 

“Heirs” refers to people who have the right to inherit when someone dies without leaving a will (called “dying intestate”). Beneficiaries are the people who inherit according to a will.

 

Who the beneficiaries or heirs are is usually decided by:

  • The terms of the will,
     

  • State law, if there is no will, or, if there is a problem with the will, or
     

  • Other estate planning documents like beneficiary designations (like in retirement accounts), living trusts, or joint tenancy arrangements.

It is not always straightforward to figure out who heirs or beneficiaries are. Even if there is a will, maybe it was not up to date and the new spouse was not included or the will was not changed after a divorce, or a beneficiary named in the will already died, and many other situations. You may need to talk to a lawyer to help you figure out who the heirs or beneficiaries are.

Step 4: Identify and make an inventory of the decedent’s property.

You will need to carefully identify all of the decedent’s property, everything they owned. Then, you will have to make an inventory of everything.

 

To identify the property, here is some helpful information:

  • Real property refers to land and things permanently on land, like houses. It also includes things like a real estate lease of at least 10-year term or with an option to buy. If you are not sure if something qualifies as real property, talk to a lawyer.

  • Personal property is all property that is not real, and it can be tangible or intangible:

    • Tangible property are things you can touch, like cars, boats, jewelry, furniture, antiques, etc.

    • Intangible property is abstract. It is a right to be paid money or have some type of power and it is usually laid out in writing. For example, stocks and bonds are intangible and the stock certificate is the document giving you ownership over the stock so you can sell it.

  • Figure out how the property you found is owned. Was it just owned by the decedent, or did they own it with someone else? Was it bought during a marriage, making it community property, or before the marriage? Maybe it was a mix of both? These questions can be difficult to answer on your own.

 

Once you have identified all the property and have all the necessary papers, you will have to make a list of assets and debts. It should list all the property the decedent owned when they died. For your list, write down:

  • Each asset, with a brief description,

  • The value of the asset as of the date of death

  • How the decedent owned the asset (like, separately, or in joint tenancy, or as community property, etc.)

  • What portion of the asset the decedent owned, and the value of the decedent’s portion, and

  • Whether anyone could file a claim specifically against the asset for repayment of a loan or other debt.

Step 5: Figure out the best transfer process for the assets.

Once you know what property the decedent had when they died, who should get what, and what the value of everything is, you need to figure out how to transfer it. As we have explained, there may be simplified procedures available, or it may have to be done formally in probate court.

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