Trust Administration … when someone dies

Trust Administration is the process of doing what needs to be done when someone dies and he or she had a living trust or other types of trusts (such as irrevocable trusts).

Trust adminstration is much easier, faster, and less expensive than the probate court process (and loved ones of those who did not have an estate plan, or merely had a will have to suffer through the probate process).  We estimate probate costs 5% of a decedent’s assets (which unfortunately for you includes the fair market value of the home).

Further, while probate is a public process, trust administration is a completely private process that takes place in the comfort of your lawyer’s office.

Nonetheless, despite the many benefits of trust administration, there is still some work to be done.

The first issue is whether the person who has died was single or married.

Trust administration is very important when the person who has died was married and had a joint revocable trust with his or her spouse.  Trust administration for a single person is also important, however, it is often a simpler process.

The second important issue is what type of trust design did the deceased have?

Was it a disclaimer trust?  Was it a Clayton Election?  Did the Trust have a formula (pecuniary formula) or a fractional share formula?

Fortunately, a review of the Trust (or the trust declaration) will reveal the type of trust.

The next important step is to marshall all the assets.

Our clients, especially those on our membership program, will know their assets because we keep up-to-date family wealth inventories.  Those clients who are not on membership, will keep their own family wealth inventory up-to-date.  That way, if someone were to die, it makes it very easy to marshall the assets and create a trust administration asset inventory.

Depending upon the trust design, there may be disclaimers to be made (which must be made within 9 months of the date of death), there may be elections to be made — funding various subtrusts.  These steps are critical to preserve estate tax exemptions (but not this year).   This year, the issue is capital gains tax.  So, if someone dies in 2010, funding subtrusts is still important.  And, for those who may have a trust that was drafted several years ago they may have a formula trust, e.g. at the death of the first spouse, there is a formula (which is usually tied to the estate tax) about how the credit shelter (family bypass) trust is funded and whether a QTIP or marital trust is funded.

BAD NEWS for you if someone dies this year with a formula trust design and they have assets that have significant appreciation.  Why?  because there is a very high chance (it depends on the precise wording used) that all assets will either go to the credit shelter trust, OR, to the revocable survivor’s trust.  The bad news is that neither one of these trusts allow a surviving spouse to take up to $3million in appreciated assets without paying capital gains tax.

BUMMER!  The solution is to update your trust before that happens to you.

Now, if this is all too complicated and doesn’t make any sense to you… fear not.

We are here to help you.  We will walk you through this process, explain it to you every step of the way and make sure that your Trust Administration is handled properly with grace and ease.

The reality is that if your loved one or spouse has died, you are going through a very difficult time and our goal is to make this process as easy for you as possible.


Kristina Hess

p.s. if you haven’t had your Trust reviewed recently, you should bring it in, we will do a complimentary review and if you have formula funding that puts you at risk, we will update your Trust so that it works for you to minimize taxes and hassle for your loved ones.