Many people create trusts to hold and manage assets as a part of their estate plan. For each trust, they nominate a trustee, and often a successor trustee or two, to make key decisions about investments and asset distribution.
However, for most people, managing those assets and following all legal requirements for trusts can quickly become overwhelming. And because trustees can be held legally liable for mistakes made in the process, many choose to seek professional trust administration services.
So what are trust administration services, and how do you know when you need them? Here’s a closer look.
Understanding What Happens After a Trust Becomes Effective
There are several reasons that someone may create a trust as part of their estate plan. Irrevocable trusts often come with tax benefits, and they may help protect assets from creditors. Revocable trusts, or those that can be changed or dissolved during the grantor’s lifetime, don’t generally have the same tax benefits. But they can keep assets out of probate and speed up the process of transferring assets to beneficiaries.
The person creating the trust is called a “grantor” or “settlor.” Before their trust becomes effective, they generally need to take the following steps:
- Create the trust document with the help of their attorney
- Transfer assets into the trust by retitling assets in the trust’s name
- Sign the trust or have it notarized
In the case of a revocable trust, sometimes called a living trust, the grantor may act as the trustee during their lifetime. They nominate a successor trustee to take over after their death. After the grantor’s death, a revocable trust becomes irrevocable, and the successor trustee takes over asset management duties and oversees the distribution of assets.
Trust administration after death of the grantor can be complex, and it’s almost always advisable to seek the help of an attorney. But what is trust administration, and what does a trust administrator do?
The administrative process is done outside of court, and it generally involves the following steps:
- Securing and appraising all trust assets
- Notifying beneficiaries and providing them with periodic updates
- Notifying creditors and settling outstanding debts
- Paying taxes, if required
- Distributing assets to beneficiaries
A trust administrator assists with these tasks and helps the trustee make sure they properly follow the trust document and the law. An administrator may provide advice and guidance, but the trustee is the one who maintains ultimate decision-making authority.
The First Steps a Trustee Should Take After Assuming Responsibility
The trust administration process is more complex than many people realize. Being named a trustee is an honor, but as you might have discovered already, a trustee’s role comes with an enormous amount of responsibility. If you’ve agreed to be a trustee, here are the steps you should take:
Gather All Trust Documents
Sometimes, keeping your family’s wills, trust documents, and other estate planning documents together in a safe or other secure location is straightforward. Unfortunately, that’s not always the case.
If you can’t find the trust documents or other documents related to the decedent’s estate, try to find out the name of the estate planning attorney they worked with. Chances are good that the estate planning lawyer will have a copy of these documents.
Before going any further, make sure you have copies of any amendments made to the trust. If a grantor or settlor needs to make significant changes, they may create an entirely new trust document. For smaller changes like updating beneficiaries, nominating a successor trustee, or changing instructions for asset distribution, they will often draft an amendment instead.
As a trustee, you will also need multiple certified copies of the settlor’s death certificate. Before disbursing any assets or transferring real estate, most financial institutions will need proof of the settlor’s death. You can usually get certified copies from your local health department or vital records office.
Understand Your Fiduciary Responsibilities
As a trustee, you have a fiduciary duty, meaning you have the legal and ethical obligation to act in the best interests of the settlor and their trust. Your fiduciary duties will likely fall into four broad categories:
- Duty of Loyalty and Impartiality: You may not use trust assets for personal gain, and you must not prioritize some beneficiaries over others
- Duty of Care and Prudence: You must keep trust assets separate from personal assets, and you must protect and responsibly manage trust assets
- Duty to Account and Inform: You must maintain complete accounting records and keep beneficiaries informed of these records
- Duty of Administration: You’re responsible for following the trust administration requirements exactly as they’re written in the document
Trustees also take care of filing trust income tax returns and paying income tax, if it’s required. Tax filings for trusts can be very complex, so it’s generally wise to work with an attorney to complete them.
Get Familiar With the Trust and Its Requirements
Not all trusts are the same, and some trustees have more complex duties than others. For instance, if someone transfers their assets into a living trust to avoid the probate process, their trustee might just need to distribute assets to beneficiaries.
If a decedent establishes a special needs trust to provide for the needs of someone with a disability, their trustee may be responsible for ongoing investment management as well as approving disability-related expenses.
No matter the situation, the trust document should clearly outline your responsibilities as a trustee. Make sure you pay close attention to any special conditions. Some trust agreements, for example, will specify that a decedent’s children may only receive their inheritance once they reach a certain age.
Seek Legal Guidance
Don’t make the mistake of thinking that because you’re a trustee, you must handle the administration of the trust yourself. Most trust documents will explicitly state that you have the right to hire a trust administrator, and the trust will generally cover the administrator’s fees.
Georgia law establishes standard trustee compensation rates based on the value of the trust itself. Even if the trust doesn’t specifically grant you the right to hire an estate planning attorney to assist with trust administration, Georgia law entitles you to reimbursement for reasonable administrative expenses.
As the trustee chosen by your loved one, you retain ultimate decision-making authority. However, a trust administrator can help you understand your legal obligations and navigate the complex trust administration requirements in Georgia.
Managing Trust Property Throughout the Administration Process
For trustees, figuring out the answer to the question, “How does trust administration work?” is the first part of the process. The process of administration can take considerable time, often more than a year. Over that time period, the trustee is responsible for preserving the value of the assets within the trust.
Managing trust assets often involves the following:
- Properly maintaining real property and keeping properties insured
- Securing valuables to prevent theft or damage
- Responsibly managing investments
For trustees managing smaller estates, these steps may not be particularly challenging. However, if the decedent left considerable assets behind, it might be necessary to seek outside help.
Handling Financial Obligations During Trust Administration
During the process of trust administration, you’re responsible for handling the payment of the decedent’s outstanding debts and taxes. This process requires you to keep meticulous accounting records. If you fail to do so, you could face legal action by beneficiaries who feel that their inheritance is being mismanaged.
Working with an attorney to manage the trust can be key here, too. Your administrator can help you understand accounting and notification requirements under Georgia trust administration law.
Communicating With Beneficiaries and Preventing Misunderstandings
When beneficiaries file disputes, it can complicate the administrative process. Communicating regularly with beneficiaries can dramatically reduce the risk that you’ll face a dispute.
At the beginning of the process, it’s important to communicate an approximate timeline to beneficiaries. Otherwise, they may become impatient or wonder if you’re neglecting your duties. Maintaining a detailed trust accounting record and keeping beneficiaries updated can help protect you as well.
Throughout the process, it’s essential to act impartially toward all beneficiaries. If you appear to favor some beneficiaries over others, it may lead to allegations that you’re violating your fiduciary duties.
Common Issues That Can Delay Trust Administration in Georgia
Trust administration for trustees can be difficult, but if you run into any of these issues, the process could become significantly longer and more complex:
Poor Communication
Failing to regularly update beneficiaries or respond to their concerns promptly may lead to legal challenges.
Complex Assets
If the settlor had real estate across multiple jurisdictions or left behind assets that are difficult to locate, the administrative process could be delayed.
Considerable Debt
If the settlor had many outstanding debts, verifying creditor claims and paying debts can slow down the administrative process.
Beneficiary Disputes or Contests
In some cases, beneficiaries may contest the trust itself or argue that the trustee has violated their fiduciary duties. These challenges may lead to court battles that can extend the administrative timeline by months or years.
When Trust Assets Can Be Distributed to Beneficiaries
What are trust administration services for beyond asset distribution? Many people think that a trustee’s main responsibility is handling assets, but in reality, that’s a small part of the process.
Before any assets can be distributed to beneficiaries, a trustee must typically take the following steps:
- Identifying and notifying creditors and paying all legitimate debts
- Paying administrative expenses
- Paying any applicable taxes
Some trusts allow for assets to be distributed to beneficiaries immediately after debts, administration expenses, and taxes have been paid. Others only allow distribution after beneficiaries have reached specific milestones. If the trust you’re overseeing falls into the latter category, you’ll need to make sure assets are responsibly managed until distribution.
How a Georgia Trust Administration Attorney Can Help Trustees
Even if you’re a financially capable person, professional trust administration services are an essential part of handling a trust. But what are trust administration services for when it comes to seeking help from a lawyer? These are some of the key ways a trust administration attorney can assist you:
Interpreting Trust Documents
Many trust documents are lengthy and complex. With an attorney reviewing the documents for you, you can make sure you fully understand what’s expected of you as a trustee.
Securing and Inventorying Assets
Taking inventory and appraising assets are vital parts of trust administration. Your lawyer can help you accurately account for all trust assets and preserve their value during the administrative process.
Following Notification Requirements and Handling Debts
Once a trust becomes effective, you must notify beneficiaries and creditors. Creditors may submit claims to the trust, but these claims aren’t always legitimate. Your lawyer can help you identify legitimate claims and determine the order in which they may be paid.
Addressing Taxes
Trusts that generate income may be liable for income taxes. Georgia does not have a state-level estate tax, but depending on the total value of the trust, federal estate taxes may be owed. An attorney can help you properly determine tax liability, complete all required filings, and pay taxes due.
Preparing Trust Accounting
Proper trust accounting is a critical part of maintaining transparency and fulfilling fiduciary requirements. Your attorney can assist with this process and provide beneficiaries with periodic updates.
Need Trust Administration Services in Georgia?
Trust and estate administration are vital efforts, and serving as a trustee for a loved one is commendable. However, if you want to avoid personal liability and ensure that the trust is handled according to state and federal laws, seeking professional trust administration services is wise.
For many trustees, selecting the right trust administrator is one of their key responsibilities. The experienced team at Horizon Law Firm helps Georgia individuals and families navigate the intricacies of trust administration and estate planning with clarity and confidence. If you’re a trustee in need of professional guidance or trust administration legal services, contact us today to schedule your consultation.
