13 Jan How to Administer a Trust

Fulfilling the duties of a trustee can feel overwhelming at times. There are many rules to follow and many tasks to carry out if you want to ensure the trust is administered successfully. It can often be difficult to know exactly where to start. We put together this checklist on how to administer a trust to help you understand what to expect from the process. 

What Is Involved in Administering a Trust?

Trust administration is the process of managing and distributing the assets in the trust after the grantor (the person who created the trust) passes away. This process is one of the responsibilities of the successor trustee named by the grantor. The trustee must follow all of the instructions left by the grantor, and cannot make any changes to the trust. 

How Long Does It Take to Administer a Trust?

Although assets in a trust will avoid probate, administering a trust is still a long, complex process. If no issues arise, trust administration typically takes around 12 to 18 months to complete. However, lawsuits and family fights over inheritance can draw the process out for several years. You can also be tasked with managing a trust until a minor beneficiary turns 18, graduates college, etc. depending on the grantor’s wishes.

How to Administer a Trust

1: Collect All the Necessary Documents

As the trustee, you will first need to gather the grantor’s relevant trust planning documents, which may include:

• Several copies of the death certificate, which you can request from the funeral home or the county where the grantor resided
• A copy of the certification of trust
• The grantor’s social security number
• Copies of the grantor’s life insurance policies and retirement accounts
• Their most recent federal and state income tax returns
• Their bank account statements and other financial documents

Make sure to review the trust document thoroughly to determine which other documents will be required for distributing each asset. It’s always a good idea to set up a record-keeping system to stay organized and make the process go as smoothly as possible. 

2: Secure and Evaluate the Assets

Next, you will need to make an inventory of all of the assets listed in the trust so you can locate them. Some assets may be located in the grantor’s home, in a storage unit, in a digital vault, in online accounts, etc. 

You will also need to check that the trust is properly funded, meaning that all the titled assets have been transferred to the trust. Then you will need to value the assets based on how much they were worth at the time of the grantor’s death. 

3: Notify the Grantor’s Beneficiaries and Creditors

You are required to let beneficiaries know that the trust exists within 60 days of the grantor’s passing. You should give the beneficiaries your contact information so you can communicate with them easily, and you must let them know that they are entitled to receive a copy of the trust document if they wish. 

In addition to notifying the beneficiaries, you will also need to file a notice to the grantor’s creditors. You will need to publish a weekly notice in the local newspaper for around three weeks and send a written notice to the creditors within that time. 

The creditors have up to four months from the date of the first notice to file a claim. If the estate doesn’t have enough funds to settle its debts, then funds from the trust must be used. The trustee must review claims against the trust and decide if they’re legitimate, then pay accordingly. 

4: Pay and File Taxes

You will need to apply for a tax identification number for the trust, so that it becomes a separate entity from the grantor. Then, you will need to file and pay any property or income taxes that are applicable to the assets in the trust. If you are also the executor of the estate, you are required to file the grantor’s final tax return as well. 

5: Distribute the Assets

Finally, you must distribute the assets in the trust according to the grantor’s instructions. In many cases, the assets can transfer to the beneficiaries right away. However, some grantors may dictate that certain assets remain in the trust until the beneficiary turns eighteen, graduates college, or meets other requirements. You are responsible for managing the assets in the trust until it comes time for their distribution, no matter how long that takes.

Trust Administration Attorney in Arizona

Administering a trust is a complex process that requires careful planning. The experienced team at Phelps LaClair can help you administer a loved one’s trust in accordance with Arizona’s laws. If you have questions about how to administer a trust, call us at 480-892-2488 to set up a free consultation.

Images used under creative commons license – commercial use (1/13/2023). Photo by Sora Shimazaki on Pexels