Many people who attend an estate planning seminar or meet with an attorney and execute a revocable living trust think they are done–finito. They think once they put their estate plan in place, all their needs have been met. They can move ahead confident that when they die, their estate will be administered in accordance with their wishes. They just put their trust in the bookshelf and forget about it.

Executing an estate plan isn’t the end of the process. While your wishes will be carried out and you will likely save your family time and money, you cannot execute it and forget it. You need to fund the trust by transferring all or most of your property from your individual name to the trust. If you don’t, your heirs may be disappointed to learn a separate probate is still necessary.

You should review your estate plan with your attorney on a regular basis. Each time you buy or sell property, have children or grandchildren, get married or divorced, or make other life-altering changes, they may affect your estate plan.

What if the person named as successor trustee dies or moves to another state? Or is diagnosed with dementia or Alzheimers? Or what if a relative dies and leaves you property? If you don’t get it transferred into your trust, you have created problems for your heirs.

Trust administration is a crucial element of any estate plan, but it is often overlooked. Trust administration is what allows someone to step in if you become incapacitated or unable to continue as your own trustee. It also allows for the orderly settling of your affairs after your death, including the distribution of trust assets to your heirs.

Just like a business needs a manager or a state needs a governor, your trust needs someone to manage it. Usually you serve as your own trustee or co-trustee. If you become disabled or die, someone has to serve as successor trustee to manage your trust for you. He (or she) must perform specific duties and fulfill certain responsibilities set forth in the trust instrument or in the law. This person serves in a fiduciary capacity and must comply with specific rules or face the consequences.

When you designate a successor trustee, your attorney should meet with this person and explain what is required. The successor trustee must make sure your wishes are complied with in a timely and legal manner. When you die, the trustee must complete the following essential steps:

In addition to completing these tasks, the trustee must prepare and file income and estate tax returns, as appropriate, and complete and file deeds or title documents to convey real property (home, farm, vacant land) and automobiles and other titled property to your beneficiaries. He will almost always encounter problems or actions to be taken that aren’t addressed here, but which will require consultation with your attorney to make sure everything is done correctly and on time.

The administration of trusts can be complicated. While trust administration is normally less costly and time consuming than probate, it is a legal process that requires attention to detail and compliance with legal requirements. The person you name as your successor trustee may be confused or even overwhelmed by this new responsibility. This is why I recommend you involve the successor trustee in the estate planning process so he knows what to expect before administration of the trust is thrust upon him. If he knows the extent, nature and value of your trust estate and what is expected of him during the administration process, it will make it easier for him when he assumes the mantle of trustee.

If you don’t have an estate plan or need to update it because of a move or change in circumstances, consult with an attorney who specializes in trust and estate planning. While any attorney can prepare a simple will, if you are older or have a substantial estate, you will be better served by going to someone who focuses on estate planning. If you are elderly or feel you may need institutional care in the foreseeable future, select an attorney who understands Medicaid planning and the special needs of the elderly.

Selecting a successor trustee also requires great thought as this person will assume significant responsibilities for the administration of your estate. If you choose a beneficiary to act as your successor trustee, she may find herself in conflict with other beneficiaries. While the concerns of the others may be unsupported by the facts, this won’t lessen the stress on all concerned.

You also need to select someone who is fiscally knowledgeable and responsible. Just because someone has amassed great wealth in his own right doesn’t mean he should be managing your funds. It may be fine for him to take risks with his money, but you probably want someone with a more conservative bent to handle yours.

If your estate is large or complicated, consider a financial institution as your successor trustee. Discuss this with your attorney. Only then should you select a person or institution to best serve your interests.

An estate plan with a trust will overcome many of the issues encountered with a simple will (such as probate or who steps in if you are incapacitated), but even a trust must be administered and tax returns filed. Selecting the right successor trustee and attorney will help simplify the administration of your estate for your successor trustee and your beneficiaries.

© Jerry E. Shiles 2004

To return to the Strategic Planning Articles click here.

Please read the following disclaimer about this website.
Content ©2004 Brown & Associates, PLLC. All rights reserved.