Trust administration typically proceeds without the involvements of the probate court. Trust administration refers to the process of gathering trust assets, accounting for the assets, income, and disbursements, paying debts, expenses, and taxes, and distributing the trust property according to the terms of the trust agreement.
Upon the death of the Settlor a Trust, the Trustee has the following responsibilities:
- Identify, gather, and preserve the Trust assets.
- Receive any payments due to the Trust including dividends, interest, and other income.
- Obtain a tax payer identification number for the Trust.
- Set up a bank account for the Trust Estate.
- Value the Trust assets as of the date of death.
- Give legal notice to potential creditors.
- Provide the beneficiaries with an inventory and annual accountings, and keep them reasonably informed of the Trust’s administration.
- Prepare and file an Income Tax Return for the Trust.
- Pay taxes, debts, and expenses of administration.
- Distribute the Trust assets according to the terms of the Trust.
In general, the Trustee is responsible for administering the Trust in good faith, in accordance with the law, in agreement with its terms and purposes, and for the benefit of the Trust’s beneficiaries.
Upon the death of the Settlor (the author of the Trust), a Trust becomes a taxpayer and is required to obtain a taxpayer identification number (called an employer identification number). If the Trust has gross income, the Trustee may be required to file a fiduciary income tax return (Form 1041), and pay the taxes due.
Upon the death of the Settlor, the Trustee is required to publish a notice to creditors. Creditors then have four months to present a claim for payment. Upon receiving a claim from a creditor, the Trustee must determine whether to allow the claim and pay it, or disallow the claim. If the claim is disallowed, the creditor is notified and has 63 days to file an action for payment.
As a Trust beneficiary, you have a right to be kept reasonably informed about the administration of the trust. This includes: the right to request a copy of the Trust document, to receive an inventory and annual accountings of the Trust, and to be notified of the Trustee’s compensation (if any).
You can either apply for the number online at www.irs.gov or complete IRS Form SS- 4 and either mail or fax it to the IRS. The number is issued by the Internal Revenue Service after the application process is completed.
This is a document that can be given to banks and other third parties in lieu of the Trust Agreement. It is typically prepared by the attorney for the Trust and sets forth the material terms of the Trust, including the taxpayer identification number, the Trustee’s name and address, and the relevant powers of the Trustee.
One of the primary reasons people create Trusts are to avoid probate court. When the Settlor (the person who executed a revocable living Trust) dies, there is generally no need to register the Trust with the probate court, and property is able to quickly and efficiently pass to the beneficiaries.
However, there are still times that the court’s involvement is necessary to resolve Trust disputes. The probate court is the appropriate forum when disputes arise.
Some scenarios in which there may be a need to commence a Trust dispute file, to supervise its administration, or to compel the Trustee to do something are:
- The Trust was executed while the person was under undue influence, mental incapacity, duress, fraud, or some other defect.
- The trustee is not giving the Trust beneficiary(s) adequate information.
- The Trustee is not administering the Trust properly.
- There is a dispute about how to divide or distribute the Trust assets.
- Assets were improperly titled at the time of death (joint ownership, pay on death beneficiaries, or not titled in the Trust).
- Allegations of fraud or self-dealing against the Trustee.
When Trust disputes arise, The Probate Pro’s team of experienced litigation attorneys can represent trustees, personal representatives, and beneficiaries in probate and trust litigation. If you are faced with litigation involving a Trust, whether as a Trust beneficiary, trustee of the Trust, or as a creditor, The Probate Pro can confidently represent your interest.