Trust Administration and Probate

• Who inherits their home?
• What happens if they didn’t have a will?
• Who’s responsible for paying their debts?
• Is there any way to avoid the headache of probate? 

If you’re feeling a little lost and confused, Legacy Design Strategies is here for you. Below, we’ll tell you everything you need to know about probate and trust administration.

So, what is probate? Put simply, the court uses probate to validate someone’s will. Even if your loved one didn’t have a will, their estate must go through probate.

If you’re the executor of a will, you might have no idea where to begin. Here’s how probating a will works:

Did they own a home? If so, check whether they set up a “joint tenancy with rights of survivorship.” That means ownership will go directly to the co-owner without probate.

If they held assets in a revocable trust, those assets will pass to their beneficiaries without going through probate. Irrevocable trusts don’t need to go through probate, either. Even better, you may not have to pay estate taxes on assets in an irrevocable trust.

If your loved one didn’t do any of these things, you probably have no choice but to go through probate. In some states, though, estates may qualify for a simplified version of probate if valued below a certain amount. 

To qualify for simplified probate, the estate must be valued below these amounts:

• Nebraska: $50,000
• North Dakota: $50,000
• Iowa: $100,000

If the estate qualifies, beneficiaries can sign an affidavit to claim the assets. All beneficiaries must agree to the distribution of assets, and in a perfect world, that’s what will happen. 

Sadly, though, it’s common for fights to break out over who inherits what. If your family members can’t agree on how to split things, the probate court will hold a hearing to settle the argument.

Simplified probate laws vary quite a bit in other states. Check your state’s laws to see whether your loved one’s estate is small enough to skip probate.

Administering a Revocable Trust after the death of the Trust maker involves several steps.

Confirmation of Trust maker’s Death and Gaining Control of Trust Assets

The first step is to confirm and officially document the death of the Trust maker. This is typically done by acquiring a death certificate. In addition, for a Successor Trustee to be able to access accounts and pay bills, a Tax ID is needed as well as a new Certificate of Trust and a clear understanding by the Successor Trustee of their Fiduciary responsibilities.

Notification of Relevant Parties:

Notify relevant parties, such as beneficiaries and heirs, about the Trust maker’s death.

Locate and Review Trust Document:

Locate the original Revocable Trust document and review its terms. This document typically designates a successor Trustee and outlines distribution instructions.

Initiate Probate Proceedings (if necessary):

Determine if probate proceedings are required based on the assets held outside the trust. If necessary, initiate the probate process.

Appraisal of Assets:

Conduct an appraisal of the trust assets to determine their value as of the date of the Trust maker’s death. For financial accounts, each institution will need authorization to release the date of death values on the account. For assets such as real estate or businesses, an appraisal may be required.

Successor Trustee Takes Control:

If the Trust maker appointed a successor Trustee, they assume control of the trust. The successor Trustee is responsible for managing and distributing the trust assets according to the terms of the trust document.

Notice to Creditors:

Provide notice to creditors, giving them an opportunity to make claims against the trust estate.

Payment of Debts and Expenses:

Use trust assets to pay off any outstanding debts, funeral expenses, and administrative costs.

Distribution to Beneficiaries:

Following the terms of the trust document, distribute the remaining trust assets to the beneficiaries. This could include specific bequests or a division of assets among multiple beneficiaries. In addition, some trusts will establish trust shares for the beneficiaries. These trust shares are created for a variety of reasons – minor children; special needs beneficiaries; to protect the beneficiary for things like divorce, lawsuits, bankruptcy; to protect the assets from future estate tax, etc.

Final Accounting and Documentation:

Prepare a final accounting of the trust administration, detailing all transactions, expenses, and distributions. Keep thorough documentation of the process.

Trust Termination:

Once all distributions and administrative tasks are complete, formally terminate the trust.

File Final Tax Returns:

File any necessary final tax returns for the trust, including income tax returns and, if applicable, estate tax returns.

Distribution of Remaining Documents:

Provide copies of the final trust accounting, distribution documents, and any other relevant paperwork to the beneficiaries.

It's crucial to note that the specifics of trust administration can vary based on state laws, the terms of the trust document, and individual circumstances. Seeking legal advice or consulting with a qualified professional is recommended for accurate guidance tailored to a specific situation.

It is crucial to seek the help of a qualified estate planning attorney to assist through this process. There are many important decisions and tax considerations that have be considered within a short time window.