John Marshall, estate planning attorney and host of Trust Me, It’s Complicated, explains the essentials of trust administration, covering both management during incapacity and responsibilities after death. Understanding trust administration is critical for protecting assets, avoiding court intervention, and ensuring a smooth transfer of wealth to beneficiaries.
What Is the Purpose of a Trust?
The purpose of a trust is to manage assets during life and after death outside the jurisdiction of the court, avoiding probate whenever possible. Trusts provide structure for asset management, protection, and distribution, reducing legal complications and fees that typically accompany guardianships or probate proceedings.
Trust Administration During Incapacity
If a trust owner becomes incapacitated, a successor trustee steps in to manage trust assets. A well-structured trust is often paired with a power of attorney, allowing the trustee to handle assets not yet owned by the trust, such as IRAs.
Successor trustees act as fiduciaries, which means they must act in the best interest of the trust owner while alive and in the best interest of the beneficiaries after death. Key fiduciary duties include:
- Administering the trust in good faith according to the trust terms
- Duty of loyalty to act solely for the benefit of beneficiaries
- Duty to act impartially among beneficiaries
- Prudent administration of assets without unnecessary delay
- Protecting trust assets from loss, damage, or mismanagement
- Maintaining accurate records and accounting for all transactions
- Enforcing claims and defending trust property
- Keeping beneficiaries informed of trust activity
- Exercising reasonable care and skill in managing trust assets, including hiring professionals when needed
Trustees must protect assets such as real estate, pay bills, maintain insurance, and manage investments prudently according to the Prudent Investor Rule, balancing risk and preservation of capital.
Trustee Responsibilities After Death
After the trust owner’s death, trustee duties shift from serving the deceased to serving the beneficiaries while also fulfilling obligations to the IRS and creditors. Responsibilities include:
- Filing a notice of trust with the court to inform the public that the trust is being administered
- Filing the original will and a short-form death certificate with the court
- Conducting an initial inventory of trust assets to establish baseline accounting
- Identifying creditors and negotiating debts where possible
- Filing the decedent’s final income tax return
- Collecting and consolidating assets from multiple accounts while ensuring proper investment and preservation of funds
Trustees must act carefully because personal liability exists if fiduciary duties are breached, including mismanagement of investments, taxes, or distributions.
Distribution of Trust Assets
Trustees cannot simply distribute funds immediately. Proper accounting and planning are required, including:
- Recording beginning balances, income, and expenses
- Sharing accounting with beneficiaries
- Allowing beneficiaries six months to file objections
- Obtaining consent forms from beneficiaries to approve distributions
- Performing partial distributions while retaining funds for tax obligations
This structured process ensures transparency, prevents legal disputes, and guarantees that beneficiaries receive assets as intended by the trust owner.
Choosing a Trustee
Selecting a trustee requires careful consideration of trustworthiness, financial responsibility, and accountability. Naming a family member solely based on seniority may not be ideal if they lack experience or reliability. Co-trustees are optional but not required for accountability, as fiduciary duties and reporting obligations are mandated by law.
How Marshall Law Supports Trustees
Marshall Law assists both in drafting trusts and guiding trustees through their responsibilities. Attorneys help trustees:
- Understand and fulfill fiduciary duties
- Manage assets prudently
- Protect against legal claims from beneficiaries
- Ensure distributions align with the trust owner’s intent
By working with legal professionals, trustees minimize personal liability and ensure a smooth administration process.
Conclusion
Trust administration is a complex but essential part of estate planning. From managing assets during incapacity to handling distributions after death, trustees must act diligently, ethically, and in compliance with Florida law.
For assistance with trust creation, administration, or guidance as a trustee, contact Marshall Law at (352) 820-6526 or visit marshalllawpa.com. Proper planning and execution ensure peace of mind, protect beneficiaries, and preserve the trust owner’s legacy.