A Living Trust May Avoid Court Probate, but Still Must be Administered
Much of the public has heard that implementing a Living Trust avoids the Court Probate process. This understanding is correct and constitutes the major reason a person uses a trust as their main estate vehicle as opposed to a Will. However, much of the public automatically assumes that if no probate is required, then nothing needs to be done when a creator of a trust passes away. In other words, when a person with a trust dies there is no administration required at all. This assumption simply is not true.
Every estate (whether a will or trust), must be administered in some shape or form. And yes Virginia, there is trust administration. Like a Probate proceeding, there are a multitude of laws relating to the administration of a trust which must be followed.
Trust laws and required procedures must be followed
In fact, many of the same procedures implemented in a probate are also utilized when administering a trust. As in a Probate proceeding, Trust Administration requires an inventory and appraisal of the assets at the time of death, the payment of debts and taxes, and the distribution of the trust assets to the beneficiaries as directed by the terms of the trust.
Advantages of Trust Administration over Probate
The big difference is that Probate takes place in a courtroom, whereas the administration of a trust is generally conducted in private without any court intervention. In addition, the time for administering a trust estate may be much shorter than a probate and the cost for administering a trust may be less than for a probate.
What are the Trustee’s responsibilities?
The designated trustee is the fiduciary who is responsible for all of this and has potential liability for failing to act diligently and timely. Trust administration is important to have handled properly as there are many legal, tax, and financial aspects of the estate which need to be addressed in a timely manner and performed competently. For example, the trustee must safeguard trust assets, account for the assets and all income and expenses, conduct the sale of assets, pay debts and taxes, and make preliminary and final distributions of the trust assets per the direction of the trust document.