Navigating Post-Death Trust Administration: The Role of a Law Firm

When someone dies and they have a Living Trust in place, the process of trust administration will need to be undertaken. Many lawyers make trust administration appear simple at the time their client signs the trust document without fully explaining what will need to happen after their death. As a result, often the client never discusses trust administration with the designated successor Trustee.

The person or people that will serve as Trustee need to understand what should happen at the time of death of the person creating the trust.

A common misconception is that the trust doesn’t need any further attention and that everything will happen “automatically”, or that the successor Trustee won’t need the help of an attorney, a CPA and often a financial advisor to administer the trust.

In our experience, we have found that sometimes families have unrealistic expectations or incorrect assumptions about how their trust will work when a death occurs. One of the most frequent misunderstandings happens when there is a joint trust between a husband and a wife, and the trust provisions call for the trust to be split into sub-trusts (most commonly between a Survivor’s Trust and a Bypass Trust (Family and/or Marital). The most common reasons for having this type of trust are estate tax savings, asset protection for the surviving spouse, and divorce-remarriage protection for the first to die’s half of the estate.

Many times, the surviving spouse does not properly administer the trust at the first death, resulting in long-term unintended consequences. We cannot overemphasize how critical proper administration is to ensure that the intended down-line benefits of the planning are fully realized.

There is a great deal of similarity between probating an estate under a Will and settling a Living Trust. The major difference is that a Trust settlement takes place outside of the court system. This makes it private, faster and less expensive.

When someone dies, and they have a Living Trust, the successor administrative Trustee is required to do several things to properly administer the Trust (Key Duties of a Trustee). If not done correctly, the Trustee can be personally liable to both the current and downline beneficiaries. Further, many Living Trusts provide for the creation of on-going sub-trusts for the beneficiaries that offer inheritance protection and other benefits.

What Role Does a Law Firm Play in a Trust Administration?

✓ Advise & protect the successor Trustee to ensure are not setting themselves up for future liability
✓ Work in coordination with the other advisors (the CPA & FA) to support the Trustee
✓ Verify the titling & beneficiary designations & date of death values of all the assets
✓ Determine if a probate needs to be opened with the court for any assets not titled in the trust
✓ Open & manage the probate court process, if needed
✓ Prepare documentation that proves the existence of the administrative trust to take to the bank
✓ Prepare documentation that proves the existence of any sub-trusts that are being created
✓ Oversee funding any sub-trusts that are created
✓ Prepare documentation for the receipts & waivers needed by the Trustee from the beneficiaries
✓ Prepare documentation needed to terminate the administrative trust and close the administration

It is important to note that each trust is unique and that the situation, beneficiaries and assets of the decedent are unique. Therefore, some things that may not occur in one trust administration may need to occur in another. There are often additional considerations and tasks in a trust administration that need to be analyzed and dealt with.

Therefore, it is important to hire experienced counsel in the administration of the trust, which will also help shield the successor trustee (the “administrative trustee”) from expensive and stressful potential liability claims from the beneficiaries (and the down-line beneficiaries) as well.  If you or someone you know may need assistance administering a trust, please contact our trust administration experts by calling 615-933-7636 or submitting the inquiry form below: