As a trustee, you’ll have to get to work within a month of when the grantor dies. There will be phone calls to make, information to gather and letters to write. Later, you’ll be responsible for making good investment decisions, filing tax returns, transferring the ownership of real estate and more, requiring you to work closely with legal and financial professionals.
The extent of the work depends on the trust status. If you can distribute all the trust property to the beneficiaries, the whole job may be done in six months. However, if you’re administering an ongoing trust, such as one for children, there will be more work to do. If you’re not serving as both the executor of the estate and the trustee of the trust, you’ll want to stay in close touch with the executor during the first few months. You need to know what the executor is doing and why. In many cases, the executor will transfer any estate assets that are not held in the name of the trust to the trust, where they become your responsibility.
These are tasks that any trustee, even one who administers a small trust, will have to complete:
- Secure death certificates.
- Obtain a copy of the will and file it with the local probate court.
- Notify the Social Security Administration of the death.
- Notify the state Department of Health of the death.
- Identify the trust beneficiaries.
- Notify the beneficiaries.
- Inventory the trust assets.
- Protect the trust property.
- Get a Taxpayer Identification Number.
- Transfer any property into your name as the trustee.
- Review the trust investments.
- Set up a recordkeeping system.
- Arrange to have assets appraised.
- Pay debts.
Before you notify the beneficiaries, read the trust instrument and make a list of the people it identifies. A trust might not be perfectly clear about this; it might not refer to them by name, but instead use terms such as “children” or “issue.” You’ll need to understand what each term means under your state’s laws. You may want to consult a trust administration attorney.
Of course, each of a trustee’s tasks involves a number of smaller errands. Here are a few of the challenges you’ll face as you go about your duties:
- You’ll need to know what the trust owned and what the trust owed.
- You’ll need to get a federal tax identification number from the IRS so that the trust can accurately report the gains and losses it incurs before you distribute the property to the heirs.
- You’ll need to figure out the value of the assets the trust owned at the time of the death. You will probably hire appraisers and scrutinize account statements.
- You’ll monitor incoming mail and pay debts as they come up, including funeral expenses and trust administration expenses such as monies owed to lawyers, housecleaners and tax preparers. Possibly, if you’re also the executor, you will pay personal debts such as credit card balances and medical expenses.
- You’ll need to communicate with and answer beneficiaries’ questions, provide statements and account information, and offer an overview of tax reports.
You won’t have to file a trust tax return unless the trust assets generate more than $600 in income. For a trust that exists for more than six months, you’ll want to keep track of the movement of money in each trust account. Set up the accounts carefully to avoid problems at the end of the year.
Trustees get paid from the trust assets. Occasionally, the trust will define what the compensation amount should be.
Being a good trustee takes some work, but nothing too overwhelming. You’ll take control and protect trust property, administering the trust as a prudent person in the interests of the beneficiaries with impartiality. With patience and effort, you’ll do a great job.
Note that this is just a brief guide to a complicated topic. If you’re ever named as a trustee, you will probably want to consult a professional.