By: James Filippi
We have spoken extensively in this blog about the importance of establishing a trust to ensure the disposition of your estate is done in accordance to your wishes. Employing a trust as your tool for distributing your estate is by far the easiest method of managing your affairs. But what does that all look like? And is it so easy you can do it yourself? The answer to these questions is exactly what I plan to provide in this article.
When you establish a trust, you do so for a multitude of reasons. Whether it is as a will-substitute to avoid the probate court process, to care for minor children, or to benefit others either directly or through a charitable organization. How you have employed a trust in your estate planning will dictate what the administration of the trust will look like when you pass.
When you established your trust, you named a successor trustee, and more than likely, you named a few in case the person you named is unable to serve in that capacity for one reason or another. This successor trustee steps into your shoes and has the authority to manage your trust in almost the same manner as you did while alive. The biggest exception being they are not allowed to modify the trust since it becomes irrevocable upon your death. Other than that, the successor trustee has the authority to manage the trust in accordance to the instructions in your trust agreement.
The successor trustee is responsible for ensuring the estate is distributed accordingly, whether to beneficiaries, creditors, or the tax collector. There are steps the trustee must follow to avoid getting themselves into trouble, personally. First, there are a number of different notices that must be sent to all beneficiaries and reasonably known creditors. Next, they must follow all of the tax reporting requirements for both the IRS and any applicable state. This is imperative as the successor trustee takes on personal liability for ensuring this is done. The trustee must identify and secure all trust assets, pay any outstanding bills, close any accounts no longer being used, make the proper notifications to various government entities, and keep the beneficiaries informed as to the status of the process.
Winding up a trust estate has a lot of moving parts, and that can be complicated depending on the complexity of the trust as well as the ultimate purpose of the trust. The life of a trust can vary from several months all the way into perpetuity depending on the purpose of the trust. The entire process in itself is not easy and managing the requirements burdened upon a trustee can become overwhelming, especially if serving in this role is not something the trustee is well versed in or has not done extensively in the past. This is why most successor trustees choose to hire an attorney to help manage it all and to help avoid any personal liability for their acts or omissions.
The primary benefit for using a trust as a will substitute is to avoid the probate process in court. Anytime you include the court in any process it will cost more money, slow everything down, and make it all open to the public for inspection. All significant concerns for most families. But establishing a trust is just one step to ensuring this will not happen. Without an attorney, your trust could fail for a variety of reasons, the most common being that you simply failed to fund the trust properly. If this happens, it will add a significant amount of work for your successor trustee, and ultimately will land your estate exactly where you wanted it to avoid, in probate court.
While administering a trust is no easy task, it is fundamentally easier than going through the probate court process. That alone is a sufficient enough reason to establish a trust for yourself. But there is a significant amount of other benefits as well, the topic of which has been addressed throughout the other articles in this blog. However, that should not replace a consultation with an attorney who will customize the information they provide you to fit exactly what you’re looking for in your plan.
Call us today and we can schedule your no-obligation consultation. As we always have, we offer in-person, telephone and virtual consultations to fit your schedule and health/safety concerns. We make this process easy from step one!
Filippi Law Firm, P.C., provides legal services in estate planning, probate, trust administration, trust litigation, and personal bankruptcy in the greater Sacramento area, with a focus in Rocklin, Roseville, Lincoln, and Granite Bay. Give us a call at (916) 333-7910 or fill out the contact form to get in touch with our office. Consultations are free, and they can be done over the phone, via Zoom, or in person at our office in Rocklin. Prepare for your future and work with the best estate planning attorneys today.
