Serving as a trustee is often more complex and stressful than people expect, especially when it’s time to administer the trust after someone’s death. In this guide, we’ll walk through a general trust administration timeline, outlining how the process typically unfolds in Royal Oak when a person passes away. Keep in mind, every trust is different. It’s essential to work with an experienced trust administration attorney to navigate the specific requirements of your situation.
The trust administration timeline begins with a trustee accepting their appointment and receiving a certificate of trust. This certificate is like the letters of authority that authorizes a personal representative to administer a deceased’s estate, and gives a trustee the authority to handle the affairs pursuant to the trust and the duties as set forth by statute. This document can be used with financial institutions to sell real estate or do whatever is needed to administer the trust.
The next step in the process is giving notice to the beneficiaries of the trust. You don’t have to give them the details of the whole trust, only the relevant provisions; as well as a typical notice letter under the statute MCL 700.7604. This provides notice of the rights of the trust beneficiaries to object to the trust itself, within a certain timeframe.
Giving notice to creditors is an important phase of the trust administration timeline. There are some creditors who should be known to you, but you must also publish the opening of the trust for any unknown creditors whom you may not necessarily be aware of. There’s a statute that defines the process relating to the trustee providing notice to creditors to ensure you are administering the trust appropriately and giving the creditors an opportunity to file claims over the deceased’s debts.
From there, you start gathering trust assets. Trustees must answer important questions: What is the nature of the asset? Who holds it? Where is it located? What is its approximate value?
This process can go on for quite some time. Eventually, an inventory is prepared and served upon the trust beneficiaries, letting them know of the assets as of the date of death. Then it comes time to administer these trust assets. It’s important to understand there’s a difference between an individual asset (an asset in an individual’s name that may flow through the probate proceeding) and an asset being administered through the trust.
It’s also important to differentiate between an asset that may have a named beneficiary, like a life insurance policy, or a jointly held asset of which the survivor would take. Depending on how these assets are titled and whether there’s a joint owner or a named beneficiary, it will determine whether they are a probate asset or a trust asset, or neither.
In addition, a trustee will need to resolve the debts, which could include unsecured debt like a medical bill or a credit card, as well as secured debt like a mortgage, lien on a vehicle or IRS tax debt.
We’re painting with broad strokes here, because there are very important rules about how you address creditors and provide proper notice. When you do distribute the trust assets, you don’t want an identified claimant to come forward later and disrupt the trust which was just distributed.
We often talk about “resolving” debts, rather than paying or settling it. There are particular statutes that identify how you address the payment of debt, depending on whether there’s sufficient assets in the trust to address all of the debt and whether the claimants have appropriately filed claims. Thus, there may be some debt claims that are never “paid.”
At some point you will start distributing the trust assets, from cash to real estate. There are particular provisions of the statute that identify how you can distribute in like-kind, which generally means you can’t favor one trust beneficiary over the other. There may be interim distributions and then a final distribution. At some juncture, when all of the trustee responsibilities are concluded, you close the trust.
Although it can be administered through the probate court, most trusts are administered in private. If the administration occurs outside of the probate court then none of the information is public record. If a trust is being administered through the probate court, then much of this timeline still holds, but there are filing requirements that may occur within the probate court itself.
Trusts come in all shapes and sizes, and will contain different language for how to administer it. This general overview is not a substitute for tailored legal advice. Every trust has unique provisions that must be followed precisely to avoid mistakes and liability. You should work with a skilled probate practitioner who understands how to abide by the provisions of the trust, as well as all statutes, court rules, and case laws that may apply. Our Royal Oak attorneys can further explain what you can expect with the trust administration timeline.