A very common scenario plays out time and time again: A parent or loved one, years ago, planning ahead (which in and of its self, is something almost 70% of American’s do not do), created a Revocable Living Trust. The Trust book was then placed on the shelf and has collected dust during the past 10+ years, having never been updated nor properly funded. I have been named as the “Trustee”, what do I do now?
First of all, let me tell you, although serving as a Trustee can be very rewarding it can also be a thankless job, as you will most likely be very under appreciated by the beneficiaries you are serving. Secondly, also recommend that you get help and get it quickly, as there are many important things that must be done to properly administer the Trust.
A common misconception in creating a Trust is that once it is created, the Trustmaker has done his or her part and is done. Additionally, many incorrectly assume that the Trust is a “magic” book that will do all the work of the administration without the need for proper legal counsel and advise. Being a Trustee of a Trust, however, is a lot of work. You are a fiduciary, which means you will be held to a higher standard of care than a normal person would be in dealing with his or her own assets, as you are managing someone else’s assets, and are to follow his or her instructions as to how such assets are to be used and distributed.
There are many tasks, duties, responsibilities, complexities and pitfalls that a Trustee should know while administering a Trust. It would be impossible to list and outline all such items in a short article, so the following are merely examples of things to be aware of and not meant to be an all inclusive list of tasks or concerns:
- Hire proper legal representation to help you understand the terms of the Trust and to inform you of your duties and responsibilities;
- Gather and Protect assets immediately, including making sure tangible personal property doesn’t “walk away” from the home during funeral services or other family events after a passing;
- Legally take over as Trustee, signing an Acceptance of Trustee document. This document may need to be recorded in a County where there is real estate located in order to transfer title;
- Notice Beneficiaries of the Estate, within the statutory time frame under Arizona law that you are now acting as the Trustee;
- Create and sign a new Certificate of Trust. This document will be used and provided to the various financial institutions where there may be Trust assets;
- Obtain a new tax identification number for the Trust, if necessary;
- Prepare a full inventory and appraisement of all Trust assets in addition to all non-trust assets, in order to property account for Trust assets, which is your responsibility, and in order to determine whether an estate tax return should be filed;
- If you have identified assets belonging to the Decedent that were not properly funded into the Trust, talk with legal counsel about the possibility of having to probate such assets;
- Work with a CPA or other tax professional to make sure all final tax returns (1040/141’s) have been filed and any additional tax returns (1041/141, 706, etc.) are filed, as necessary;
- Identify all known creditors of the Decedent’s Estate, publish a Notice to Creditors pursuant to A.R.S. § 14-6103 and A.R.S. § 14-380, in order to shorten the statute of limitation to file a claim against the Estate. Settle, negotiate, compromise and or pay all claims against the estate, pursuant to state law;
- After all taxes, claims and other administrative duties have been finalized and completed, prepare for making distributions pursuant to the terms of the Trust, whether it be creating protective sub-trusts, preparing for a staggered allocation of assets, a direct distribution, etc.;
- Prepare the final accounting of the Trust, to be submitted and approved by all Beneficiaries;
- Obtain Receipt and Release documents from each beneficiary acknowledging that they have received what they are entitled to from the Trust;
- Hold back a sufficient “reserve” amount in order to finalize the administration and resolve any issues that may come up;
- Get paid for your services. Under Arizona law, a Trustee is entitled to “reasonable” compensation for their services performed on behalf of the Trust. It is very important that the Trustee documents his or her time with great detail as such time may be questioned by the beneficiaries.
The administrative tasks referenced above are by no means a complete list of all the duties and responsibilities that you now have as the Trustee. Nor does it infer that there will not be problems that you will need to resolve within the family. Lastly, my best advice to you is to make sure you properly communicate with the other beneficiaries. Make sure you periodically inform them as to the status of the administration, answer questions, and seek their advice when appropriate.
If you have any questions regarding Trust administration or family based estate planning or any other legal issues, please do not hesitate to call the attorneys at Rowley, Chapman & Barney, Ltd. (480) 833-1113. Kenneth C. Barney is an estate planning attorney and partner with the law firm of Rowley, Chapman & Barney, Ltd.