Trust administration
is the process of managing assets in a trust under three circumstances:
while you are alive and not disabled; while you are disabled
(incapacitated); and upon your death. A trust can never become
disabled and it never dies, only its trustee can. Since a trust
contains provisions for naming a successor trustee upon incapacity
or death of a trustee control is never lost and the court system
is never involved.
What follows only
applies to assets a trust actually owns. Any assets remaining
in your name individually will be dealt with using either a
power of attorney or a court (guardianship and/or conservatorship)
proceeding and upon your death must go through probate.
Upon establishing
a living trust you need to “fund”
it. This is the process of retitling assets from your name to
your trust. You have in effect given your assets an alias but
they are still yours to control. The trustee of the trust is
responsible for the management of all its assets and during
your lifetime that “management” must be for your
benefit. Usually, you are the primary trustee and you manage
the assets as you see fit, just as you would have if the asset
were still in your name. So nothing has really changed so long
as you are alive and are not disabled.
A living trust should always contain language which: defines disability;
lays out clearly what must be done to establish that a trustee
has become disabled; and, designates one or more successor trustees.
Upon disability being established, the successor trustee is
immediately and automatically in charge of the trust’s
assets. There is no need for any court proceeding. The successor
trustee must administer the trust by using the assets and income
of the trust for the benefit of anyone (yourself, a spouse,
etc.) whose support, during your lifetime, is provided for in
the trust. A durable general power of attorney also grants authority
over your assets (usually upon your incapacity) to an agent
you name. The difficulty with a power of attorney is that many
banks or other financial institutions will refuse a power of
attorney they consider too “old” or is not in their
format. At that point it is too late, due to your incapacity
you cannot execute a new one and a guardianship and/or conservatorship
proceeding will be needed. A bank or other financial institution
may instead require a review of the power of attorney by their
legal department, resulting in unnecessary delay.
A living trust also provides for the distribution of your assets
upon your death. The successor trustee you named is immediately
and automatically in charge of the trust’s asset when
you die. The successor trustee will notify all financial institutions
necessary that you have died and that s/he is the successor
trustee. The trustee will have to provide a death certificate
and probably certain pages of the trust to satisfy the financial
institution that s/he is the named successor trustee. Thereafter,
the successor trustee pays your funeral expenses, debts, and
taxes and then distributes the remaining assets as you set forth
in the trust. This may be as simple as an outright distribution
or may be in further trust; perhaps because you had a minor
or disabled beneficiary and you did not want that beneficiary
to receive the distribution directly. Once all assets are distributed
the trust ceases to exist and the successor trustee is done.
There was no need for court filings, no accounting to any one
besides the beneficiaries, and no waiting for approval.
