Estate Administration

What is Trust Administration ?

Trust Administration is a required process that bereaved spouses or children unexpectedly find themselves in after the death of a loved one who created a trust before passing on. Addressing the complicated financial and legal issues that arise throughout the Trust Administration process can be extremely difficult, especially during the very emotional times following the death of a parent or spouse. During the Trust Administration process you will be required to identify and value all the assets belonging to the Trust while navigating the various federal and state tax and probate laws. This can be a daunting process, especially during these troubled times. But an experienced estate attorney can provide the support, advice and legal counseling you need to help you successfully and painlessly administer the trust.

The Trust Administration Process

1. Inventorying the Assets of the Estate

The first task of the Trust Administration Process is inventorying the assets of the estate. This involves determining the ownership of all the assets in the estate in order to ensure that all the assets in the Trust are owned or become payable to the Trust. Once the title of the estate assets have been determined, the attorney will calculate the value of the assets based on the deceased date of death. The attorney will recommend experts in asset valuation to precisely calculate the date-of-death valuation of the assets.

2. Determining the Estate Tax

The federal estate tax in 2014 allows individuals to pass up to $5.34 million before having to pay a tax on the estate. Beginning in 2011, the surviving spouse has been able to add the amount that was excluded from the federal estate tax of the deceased to the amount that would be from the federal estate tax when they passed on. This tax exclusion portability required timely filing an election upon the death of the deceased spouse even if the estate belonged to a living trust or remained in the possession of the surviving spouse. Be aware that your state may require paying estate taxes on much smaller estates even if your estate is not large enough to require paying any federal estate taxes. Your estate attorney will help you determine which assets will be subject to federal and state estate taxes.

3. Filing Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return

The federal estate tax form, Form 706, must be filed with the IRS within nine months of the deceased’s death. If you are electing portability, then you must file a federal estate form even if an estate tax return is not required. Failure to pay the correct amount of estate taxes and file Form 706 within 9 months of the deceased’s death will result in penalties and interest being levied against the estate.

4. Additional Tax Forms

You must also file an income tax return, Form 1040, U.S. Individual Income Tax Return, for the year of the deceased’s death. In addition, you will have to file a Form 1041, U.S. Income Tax Return for Estates and Trusts, for every year that the Trust exists following the death of the original Trustor.

5. Carrying Out the Terms of the Trust

The final task of the Trustee during the Trust Administration Process once all the taxes and bills have been paid and the assets have been inventoried is to carry out the terms of the Trust. This involves following the terms which will denote how the Trust assets are to be distributed.

Purpose of the Attorney

An experienced estate attorney will have the knowledge and expertise needed to guide you through the Trust Administration process and will help you avoid the legal ramifications that could arise from a failure to manage the estate and Trust in a way that complies with the applicable state and federal laws. The ideal estate attorney will be the estate attorney who helped the original Trustor plan their estate.

The average cost of Trust Administration ranges between 0.5% to 1.5% of the cost of the value of the Trust, depending on the size and complexity of the Trust. Trusts with few assets that are in order will require much less time than a trust with many assets, especially a problem arises relating to the funding of the Trust. The costs of probate can be more than two times greater than the cost of Trust Administration.

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