Trust administration is a process that many people are thrown into after the death of a spouse or parent who was responsible for creating the trust prior to their death. The trust administration process is lengthy and challenging.
It’s not easy to serve as the administrator of a trust, which is why it’s in your best interest to work with an estate planning attorney from Jennifer N.K. Venable. Estate tax law is difficult and has many nuances that impact how you value assets and distribute them to beneficiaries.
The Stages of Trust Administration
There are defined stages of trust administration that trust administrators must follow. A trust administrator is a person named to handle the trust and distribute the assets upon the death of the person who created it.
Take Inventory of the Assets
The first part of the administration process is to take inventory of the assets held in the trust. This includes determining who the owner is of all the assets. The trust administration attorney working with you will obtain a date-of-death valuation of every single asset. This is an important step because the value of the assets can have implications on any estate and income taxes.
Determine the Estate Tax
A person is permitted to pass $5 million without incurring federal estate taxes. This amount has been doubled temporarily between the years 2018 and 2025. Despite this, there are states that have much lower limits for their estate taxes. An attorney from the office of Jennifer N.K. Venable can help determine the following:
- Which assets are held in the trust
- Which assets are outside of the trust
- Which assets are required to go through the probate process
- Which assets will be subjected to the estate tax
An estate tax is required to be paid within nine months of the date your family member died. The payment is to be submitted with the estate tax return, using Form 706.
Divide the Trust Assets
When a married couple opts for incorporating tax and estate planning into a Living Trust, they are in possession of an A-B or A-B-C Trust. This type of trust makes sure that the assets of the deceased spouse can be used by the surviving spouse, but are still held in the trust. When these assets are held in the trust, they are shielded from possible estate tax when the surviving spouse dies.
File IRS Form 706
IRS regulations require that Form 706 be filed within nine months of the recorded date of death. This form must be filed in addition to Form 1040 for the year in which your family member died and Form 1041 for every year the trust existed following the trustor’s death.
Distribute Assets to Beneficiaries
The trustee, or the person placed in charge of the trust, must follow the instructions laid out by the trustor. This means he or she must distribute the assets of the trust to the named beneficiaries following the instructions and not how they see fit. Prior to distributing the assets to beneficiaries, the trustee must ensure that all creditors are paid and that all tax payments are made to the IRS and the state.
The Benefits of Trust Administration
There is a myriad of benefits when choosing trust administration as the method of planning your estate and protecting your assets. Trusts can prevent your family from going through probate, from going to court, from your wishes being contested, and from the process being public.
It can take anywhere from months to more than a year to have a will go through probate. This means that heirs to an estate have to wait a long time to receive assets that might help them provide for themselves and their families. The probate process can also be costly. The cost ranges between an average of three and seven percent of the entire estate. Creating a trust can keep these assets with the family.
Keep Family Out of Court
Appearing in court is never easy. It is even more challenging when the appearance centers around a family member’s will. The stress of going to court can be avoided when a trust is in place prior to your death.
Avoid the Public Eye
When an estate enters probate it becomes part of the public record, which means anyone can perform a little research and learn all about your family’s situation. The trust administration process protects your family’s privacy, including financial information, so that no one outside of your family knows the assets you have or how they are being distributed.
Contact a Trust Administration Attorney Today
Creating a trust is an excellent way to protect your assets and ensure that they wind up in the hands of the family members and friends of your choosing. Trust administration and probate is a lengthy process that involves a lot of tax law. Contact the office of Jennifer N.K. Venable today to schedule a consultation with an experienced member of our team.