Trust Administration After a Death

Trust administration is an essential yet often
overlooked component of estate planning.

All competent estate planning attorneys are committed to skillfully preparing plans that faithfully implement the desires of their clients once death or incapacitation occurs. In the great majority of cases, the attorney will create one or more living trusts, choosing the specific type(s) of trust(s) best suited to minimize tax consequences and effect the client’s wishes regarding the distribution of estate assets.

An experienced attorney will also be sure to set up the trust(s) in a way that makes the administration process as efficient and smooth as possible when the time comes.

Unfortunately, this is where many estate planning attorneys tend to complete their mission, which can leave clients with the impression that everything will be simple and straightforward once the momentous event takes place.

However, a trouble-free post-death process is rarely the case, regardless of how well an estate plan has been crafted. Life almost always gets more complicated, not less, when a loved one dies. Indeed, it is our experience that at the time of death our clients’ families usually want, need and benefit by our services as much or more than the client did during the estate planning process.

Of all the times to face difficult choices and responsibilities
Several factors make this so. The underlying force is the overwhelming nature of death itself and the debilitating, even devastating effects it can have on family members. Anybody who has experienced the death of a loved one is all too familiar with the cruel irony of being forced to deal with such consequential tasks and decisions under these most trying of conditions.

At Kelley & Farren we are acutely sensitive to this fundamental reality and we believe it is our duty to be there for our clients’ families during this highly stressful and demanding experience. From the first time we engage a client we understand that we are serving not just him and/or her but also the whole family; and when death occurs, we consider it an honor to be close to and of assistance to a family during this intimate and challenging time.

Another factor that precludes the possibility of a simple after-death process is the sheer volume of often-complex tasks that demand attention, which may include many or all of the following:

Informing relatives, friends and business associates
Making funeral arrangements and decisions
Writing and publishing an obituary
Notifying social security and getting a new taxpayer number for the estate
Paying off debts and obligations
Closing bank and other financial accounts and transferring funds
Dealing with IRAs, 401k plans, annuities and insurance policies
Appraising and then liquidating and/or transferring real estate and other assets
Filing final tax returns

Post-death actions and decisions are more or less arduous than indicated above depending on individual circumstances. Kelley & Farren attorneys take a proactive role in assisting client families with these tasks, from the mundane to the complex, as needed and requested.

All the above duties are greatly complicated if the deceased client has let accurate record keeping slide (which is not uncommon, especially when there has been a protracted illness), has not organized his or her critical documents for easy retrieval, or has not clearly informed family members about important tasks to be performed that they might not be aware of on their own.

These and other possibilities argue for careful estate planning with periodic updates, and for timely, open communication between and among all affected parties. At Kelley & Farren we recognize these potential pitfalls and do everything we can to help our clients avoid them.

Some trusts are more complicated than others
As stated, varying client circumstances are best addressed by creating different types of trusts and writing individually tailored provisions in the trust(s). This is a big, complex subject that constitutes the core of an estate planning attorney’s expertise. In this discussion about post-death trust administration we only touch the surface.

When a married person dies leaving a surviving spouse, trust administration is typically, though not always, fairly straightforward in cases where assets are below the federal exemption amount in effect at the time ($2,000,000 in 2006 through 2008) and the spouse inherits a simple probate avoidance trust.

However, the types of trusts created and their administration can get significantly more complicated in situations when the first spouse passes and assets are greater than the exemption amount, or in cases of blended marriages with different sets of children from previous marriages, regardless of the amount of assets, or when a couple is young with many years of unpredictable events ahead.

In the other major category of after-death situations, that is, when the remaining spouse or a single person dies and the trust in inherited by the children, trust administration is almost always a more intricate matter, even when all the children are from a single marriage.

Any number of other factors or special circumstances can also complicate matters, such as significant gifting to charitable causes, which can take a wide range of forms.

As always, careful advance planning is absolutely essential. Whatever the circumstance, Kelley & Farren attorneys will guide and assist you throughout the process.

Insuring competent and ethical trusteeship
When a living trust is created, the client designates one or more persons to administer the trust upon the his or her death. Choosing the right person(s) to fill this role – called the successor trustee – is crucial, as the duties are serious and at times demanding.

Successor trustees who are unsuitable to act in this capacity, or who are poorly informed by the attorneys about their role, may tend to abuse a living trust because it, unlike probate proceedings, lies outside the court system, by design. Hence, oversight can be minimal, especially if the attorney is not attending to the whole post-death process as closely as he or she should. Such a trustee might even treat the funds in a living trust as if they were his or her own money.

We know of all too many cases where trustees have paid personal bills out of the trust, or made legitimate distributions to themselves but well before distributing to others. Needless to say, these practices are unethical and indefensible. Nonetheless, they can and do happen, and careful attention is required in the naming and educating of successor trustees, and in monitoring trust administration post-death.

In response to such abuses, the California Legislature passed a law requiring trustee(s) to give timely notice to all named beneficiaries and intestate heirs (i.e., persons who would inherit an estate under California law in the absence of a will or trust) about a) the existence of the trust; b) their right to receive a copy upon request; and c) their right to contest the trust’s provisions within the 120 days of receipt of the notice.

California law also requires that trustees keep financial records of all trust assets, income, expenses and distributions. At Kelley & Farren, we advise trustees to provide full trust accounting to beneficiaries as required by law.

When people disagree
Needless to say, everything goes much smoother when all the beneficiaries, descendants, spouses and other affected parties are in agreement with the provisions of the trust and will. When this is not the case, such as when one or more family members not named as beneficiaries of the trust feel strongly that they should have been, serious and usually unpleasant complications can arise.

Good planning by knowledgeable estate planning attorneys goes a long way to preventing these highly stressful occurrences. Nonetheless, people are unpredictable and feelings and intentions can change unexpectedly.

In these situations, Kelley & Farren attorneys will always do everything they can to avoid costly court battles and preserve family harmony and civility if at all possible.

How long does this all take and how much does it cost?
The answers to both questions vary depending on the inherent complexity of the trust as well as any unforeseen difficulties that might come up.

When a client’s relative calls to inform us of a death, we set up a meeting at a time in the next few weeks when the family feels it will be ready to discuss the trust. We ask the relative(s) to bring a list of assets and debts, recent tax returns, and the death certificate. This meeting typically lasts about two hours. In relatively simple cases, this could well be all the legal help you will need.

Whereas a court probate in the absence of a will generally takes nine to 15 months to complete, most post-death trust administrations are completed in six to eight months (again, with the caveat that extenuating circumstances might require more time).

At Kelley & Farren, we strive to keep our rates reasonable and our services efficient, so that any legal assistance you may need for trust administration and other post-death advice remains affordable.