Uncontested Trust Administration
If you are named the trustee on someone’s trust and that person has passed away, you may be confused about the steps you should take. A trust administration avoids probate, but there are still legal requirements and processes that you must follow; a trust is not administered automatically. A local attorney can guide you through the trust administration and ensure that the process goes smoothly. Below is more information about administering an uncontested trust in Phoenix, Arizona
What are the Steps to Administering an Uncontested Trust?
There are six main steps to administering an uncontested trust in Phoenix.
- Review the trust document. The trust document defines the purpose of the trust and the interests of the beneficiaries. It will include instructions on what your responsibilities are. Trusts can contain a lot of legal jargon and be written in a way that is difficult to understand. An attorney can help you interpret the document.
- Notify the beneficiaries and governmental authorities. There are specific legal requirements for notifying beneficiaries of their rights in a trust. Under certain circumstances, you may need to file documents relating to the trust with governmental authorities, such as the Arizona Attorney General.
- Inventory the trust assets. As the trustee, you must gather the trust property and create an inventory. For certain assets, like stocks, bonds, and bank accounts, this process can be straightforward. Business interests and commercial real estate can be more complicated. It is crucial to establish the correct value of each asset because there are significant tax implications.
- Analyze taxes (with assistance from a CPA). Depending on the value of the trust, you may have to file and pay estate taxes. In addition, you may have to file final income tax returns for the decedent or a trust income tax return.
- Create sub-trusts. When there is a joint trust between a husband and a wife, the trust provisions may call for the trust to be split into sub-trusts (often referred to as a survivor trust and a bypass trust). The sub-trusts are protected from creditors and future estate taxes. It is critical for this step to be done correctly so the surviving spouse can access the trust assets.
- Distribute assets to the beneficiaries. You must distribute the property according to the instructions written in the trust document. You may be required to manage the property for a certain period of time or retitle assets.
What are the Duties of the Trustee?
When you agree to act as a trustee, you are accepting various responsibilities and duties. The Arizona Uniform Trust Code governs the fiduciary duties of a trustee. Some important duties include:
- Duty of Loyalty. The trustee must put the interests of the beneficiaries over all other considerations, except adherence to the trustee’s duties under the law. The trustee should avoid conflicts between the trustee’s personal interests (or the interests of a third party) and the interests of the beneficiary. For example, you should not sell trust property to yourself or a company that you have an interest in.
- Duty of Impartiality. If there is more than one beneficiary, the trustee must act impartially with regard to all aspects of the administration, including the investing, managing, and distribution of the property.
- Duty of Prudent Administration. The trustee must administer the trust as a prudent person would. “Prudent” means what a reasonable person would have done in the same situation. You must exercise reasonable care, skill, and caution but are not judged in the light of hindsight.
- Duty to Control and Protect the Trust. The trustee must take reasonable steps to obtain control of the trust property and preserve it for the benefit of the beneficiaries. Some assets, such as stocks or rental property, may require active management.
- Duty to Inform and Report. The trustee must maintain detailed records and respond to beneficiary requests for information. Beneficiaries are entitled to be kept reasonably informed about their interests in the trust.
Do You Need an Attorney for an Uncontested Trust Administration?
Working alone, trust administration can be complicated and time-consuming, even if it is uncontested. A routine, uncontested trust administration can quickly become contested if you do not handle it properly. If you fail to follow statutory requirements, you can be held personally liable to the beneficiaries for any harm they suffered as a result. It is always recommended to work with an experienced attorney. With an attorney, the process will move quickly and easily.
Your Phoenix Estate Planning and Probate Attorney
If you have questions about trust administration and would like to speak to a probate and estate planning lawyer, call Nicole Pavlik Law Firm. Nicole Pavlik is an experienced Phoenix estate planning attorney who can guide you through the trust administration process. Call Nicole Pavlik Law Firm today at 602-635-6176 to schedule a free consultation and discuss your estate planning and probate needs.