Trust Administration

 

STEPS AFTER A LOVED ONE DIES

There are several steps to take after death. The following steps should be taken as soon as possible after someone dies (in no particular order):

  • Take care of any dependents or pets.
  • Determine if the person is an organ donor.
  • Locate Will/Trust and other important documents.
  • Locate electronics such as phones and computers.
  • Contact people who should know about the death.
  • Obtain (5-7) certified copies of the death certificate.
  • Determine funeral arrangements.
  • Create a list of assets and include proof of ownership (deed, title, etc)
  • Secure all property.
  • Forward the mail with the Post Office.
  • Create a list of all debts and monthly services.
  • Terminate unnecessary expenses.
  • Contact all insurance companies and verify adequate insurance.
  • Notify social security if funeral home did not.
  • Keep a record of any expenses you have with proof of payment.
  • Contact decedent’s CPA or attorney.
  • Identify and list social media and email accounts
  • Register on Deceased Do Not Contact Junk Mail Website

What is probate?
Probate refers to a method by which your property is administered and processed through the court system after you die. The probate court appoints a personal representative (also known as an executor) who then has authority to access bank and investment accounts, sell real estate, pay creditors, and to distribute the estate assets in accordance with the will or intestate succession law (your family members). The average probate case in Arizona can range from $1,500 to $6,000, depending on the circumstances.

What is trust administration?

Trust administration refers to the process of distributing the assets owned by a trust. This is typically real property and bank accounts. After the creator of the trust passes away, the person designated as the successor trustee accepts power to start administering the trust: creating an inventory of trust assets, determining if probate is necessary, paying all creditors and taxes, and then providing an accounting showing how much each beneficiary will receive. The average trust administration takes less than 6 months and the range of attorney fees is between $500 to $2,500, depending on the circumstances.

What is the difference between a probate and a trust? 

A probate estate is the property of a deceased person. If the decedent owned property while alive, then upon their death, the property becomes part of their estate if there was no joint owner or designated beneficiary. Estate property is distributed either by a will (to “devisees”) or if there is no will, by the intestate succession statutes (to “heirs”). A personal representative is appointed to administer the estate. The personal representative has many duties, such as opening probate and providing notice, disclosing inventory, paying creditors, and distributing estate assets to heirs or devisees. But generally speaking, it is a personal representative’s duty to “settle” the estate.

 

Almost all estates must go through probate. The only exception to this rule is for estates that are very small. A small estate would be one in which the personal property is worth no more than $75,000 and the real property is worth no more than $100,000 according to the County Assessor’s full cash value.

 

A trust is a way to own property indirectly and therefore avoid probate. A person who creates a trust is called a “grantor” “settlor” or “trustor.” When using a trust as an estate planning tool, the creator of the trust, transfers property into the trust, and typically appoints themself as “trustee.” The trust document will also provide for a “successor trustee.” This way, when the grantor/original trustee dies, the property does not belong to them individually, and is therefore not a part of their estate. Instead, the person nominated in the trust as the trustee/successor trustee takes over this fiduciary role with the power to administer the trust without opening probate. This person is considered to be in a fiduciary capacity and has duties similar to a personal representative. The trustee must ensure all tax issues are resolved, pay creditors and make distributions to the trust beneficiaries.

 

Almost always, if there is a trust, then there is a last will and testament. More than 50% of the probates in our office involve a trust that was not funded properly. This means that the person who created the trust did not transfer ownership and title of all their property into the name of the trust. If there is a trust, then the last will and testament is known as a pour over will, which states that anything not owned by the trust… pours over into the trust. In this situation, when a decedent dies, a probate has to be opened in order to appoint a personal representative with the power to transfer the estate property into the trust. This means there will be a probate and trust administration operating parallel to one another.

Why is the Successor Trustee Notice important?

When using a trust as an estate planning tool, the creator of the trust, transfers property into the trust, and typically appoints themself as “trustee” or “co-trustees” depending on the scenario. The trust document will also provide for a “successor trustee.” This way, when the grantor(s) /original trustee(s) die(s), the property does not belong to them individually, and is therefore not a part of their estate. Instead, the person nominated in the trust as the trustee/successor trustee takes over this fiduciary role with the power to administer the trust without seeking court approval or appointment. Without this document a third party such as a bank or realtor would not be able to connect you to the trust with any type of authority. The goal of the document (once recorded) is to connect all the dots so a third party may rely on your request to transact business on behalf of the trust.

The purpose of this document:

  1. Notification of Change: This document informs relevant parties (such as financial institutions, realtors, title companies, etc.) that there is now only 1 trustee that is currently managing the trust after the original trustee(s) has resigned, passed away, or is otherwise unable to fulfill their duties.
  2. Verification of Authority: It serves to verify that the trustee has the legal authority to act on behalf of the trust, ensuring a smooth transition in the management and administration of trust assets.

The contents of the document:

  1. Identification of the Trust: The document includes the name and date of the trust.
  2. Details of the Trustee: Information about the trustee, including their full name, and address.
  3. Circumstances of Succession: An explanation of why the trustee is stepping into their role, such as the resignation, incapacity, or death of the previous trustor/trustee and that there is no one that has equal power to act on behalf of the trust.
  4. Affidavit or Declaration: A sworn statement by the trustee affirming their appointment and commitment to carrying out the duties of a trustee in accordance with the terms of the trust and applicable laws.
  5. Signatures and Notarization: The document is signed by the trustee and notarized to ensure its authenticity and legal validity.
  6. Attachments: The affidavit includes attachments such as a copy of the trust document (and any amendments or restatements) and an original death certificate.

Do I have to give notice to trust beneficiaries?

Arizona law requires that you notify the qualified beneficiaries of the basic information related to their interest in the Trust within 60 days from you accepting your role as Successor Trustee. A.R.S. §14-10813.

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