In trust administration, a trustee handles trust property for the beneficiaries’ benefit according to trust terms defined by the “trustor” or “grantor” — that is, the person who makes the trust. The grantor names a trustee — which may be the grantor him or herself — to administer the trust. Trusts can go in effect during the grantor’s lifetime or after death. A trustee or successor may need to carry out the obligations and terms of the trust during the grantor’s lifetime, especially if he or she becomes incapacitated, or after the grantor’s death, depending on the trust arrangement.
The Troy-based trust administration law practice of Barron, Rosenberg, Mayoras & Mayoras is well respected in the tri-county Detroit area including Oakland, Wayne, and Macomb Counties. Our reputation is also recognized nationally, and our firm has helped many out-of-state clients handle trusts and estates in Michigan. Aside from our knowledge and experience, we pride ourselves on being compassionate attorneys who treat each client like family.
Trusts and Estate Planning
Establishing a trust as an element of estate and financial planning offers many advantages, including privacy, careful asset protection, and tax benefits. If you have a loved one with special needs or disability, then a special needs trust offers another benefit. Assets included in a special needs trust will not count toward financial limits for purposes of receiving governmental benefits such as SSI and Medicaid.
There are many kinds of trusts including:
- Revocable living trusts — made and goes in effect during your lifetime, can be changed or terminated as one wishes, is helpful to avoid probate
- Irrevocable trusts — permanent; cannot be changed or terminated
- Irrevocable living trust — made and goes in effect during your lifetime, but cannot be changed or terminated
- Testamentary trust — goes in effect upon death of trustor / grantor, and typically made as part of a will
- Special needs trusts — irrevocable trusts for persons with disabilities or illnesses
- Spendthrift trusts — trusts set up to provide for loved ones who have trouble handling money responsibly
BRMM’s estate planning attorneys are particularly adept at helping individuals determine what type of trust would most benefit them, assisting in creating and funding trusts, and then aiding in trust administration.
Trust Administration After a Loved One’s Death — Private, Less Formal Process
A central advantage to establishing a trust during your lifetime is that property owned by the trust, rather than generally by your personal estate, does not need to go through the probate process. Trusts keep information about assets more private than publicly going through probate court proceedings. Typically only beneficiaries will know what is going on with the trust, and many clients appreciate keeping their family financial affairs private. Trusts are typically less expensive to administer than probate. In general, trust administration will be more efficient and less formal because it will not need to go through probate court unless a dispute arises.
However, trustees must satisfy fiduciary duties and responsibilities. Effective trust administration requires understanding and completing various steps.
Inventorying Trust Assets
The first step in administering a trust after a loved one dies is locating, safeguarding, and accurately inventorying assets that are part of the trust. The assets must be valued to be properly inventoried, and we can help you find the best ways to do so. Since administering a trust is not typically court-supervised like probate is, appraisals may not always be necessary and the process can be more informal and less expensive. Some types of assets that are commonly part of a trust inventory include:
- Real estate, including residential homes, vacation homes, and commercial properties
- Personal property or household contents
- Securities — for example, stocks and bonds including interests and dividends
- Bank accounts owned by the trust and documents to confirm the value
- Life insurance policies the trustee included in the trust for the beneficiary
- IRAs, profit-sharing, or deferred compensation plans
Record-Keeping and Beneficiary Communication
One of the common traps for the unwary is not keeping good records. Meticulous and copious notes must be kept of all the transactions and disbursements having to do with the trust account and trust assets. The trustee has a duty to safeguard and prudently invest the assets; failing to keep good records can be the basis for questioning whether someone committed fraud or otherwise mishandled the assets. While a trust may be administered without involving courts, disputes about trust management may necessitate a court involvement — meaning more time and more expense. To minimize the chance of this, trustees must diligently carry out their duties and document everything done regarding the trust.
Part of trust administration and a trustee’s obligation includes open communication with beneficiaries. Beneficiaries should provide detailed records of proper trust assets handling and prudent investing. Trustees must meet the requirements of Michigan law for keeping interested individuals informed regarding trust matters.
Direct Distribution of Assets and Notice to Creditors
Sometimes you may want to distribute an asset directly to the beneficiaries instead of liquidating and consolidating assets placed in the trust account. This can be risky if unknown creditors would have a potential claim on those funds. We can help with the additional paperwork involved in direct asset distribution and advise you on timing disbursal optimally to avoid unhappy creditors from knocking on your door. In Michigan you will need to file a Notice to Creditors. The rules regarding notice can be nuanced, but we can assist you with providing proper notice to potential creditors to prevent unnecessary hassles down the line.
In wrapping up an administration, trustees have other duties. If there are debts or lingering costs, trustees must make sure these are paid. Trustees must handle taxes related to the trust and prepare income tax forms.
If the decedent named you a trustee, but you are not clear on what to do, we can advise and assist you on how to proceed. Or, if you’ve also been named an executor or personal representative, figuring out how to probate an estate can be overwhelming. BRMM has attorneys concentrating in trusts, estates, elder law, and litigation — leave the work to us, and relieve some of the burden during this difficult time.
If you need assistance with estate or trust administration, contact BRMM’s attorneys today for a free consultation at 248-641-7070.