A lot of people harbor misconceptions about trusts, and one of them is the idea that it is very complicated to administer a trust. They think that the administration process is much simpler if you use a will, but this is not the case.
When a will is used, it will be admitted to probate after the death of the testator, and the court would supervise during the administration process. It will usually take eight months to a year for probate to run its course, and no inheritances are distributed while the estate is being probated.
Creditors are notified, and final debts are paid by the executor. The court determines the validity of the will, and if anyone wants to contest the will, they can come forward during probate.
Eventually, the assets will be distributed to the heirs in lump sums, so there is no asset protection or spendthrift safeguards.
Living Trust Administration: The First Phase
If you use a living trust to serve as your primary asset transfer vehicle, you would act as the trustee while you are alive and well. The trust would be revocable, so you could dissolve the trust and assume direct ownership of the assets if you ever choose to do so.
When you draw up the trust declaration, you name your heirs as the beneficiaries, and you designate a successor trustee to assume the role after your death. You can also designate a disability trustee to administer the trust in the event of your incapacity.
You dictate the terms of the eventual distributions to the heirs when you are drawing up the trust, and this is a major advantage. The trust will become irrevocable after your passing, and the principal will be protected from the creditors of the beneficiaries.
To prevent reckless spending, you could allow for limited distributions on an incremental basis over an extended period of time. This is one possibility, but you would have the freedom to dictate the distribution terms.
Choosing a Trustee
Any mentally competent adult that is willing to assume the role can technically act as a living trust trustee. You could alternately use a paid fiduciary such as a trust company, the trust department of a bank, or another professional that offers trustee services.
As you will see in the next section, there are certain responsibilities that would fall to any trustee, but your intentions will determine the gravity of the position.
If you want the trust to remain in place over an extended period of time, fueled by income-producing assets, a professional trustee may be the right choice.
On the other hand, if the idea is to distribute the entire estate as soon as possible, a high level of financial expertise may not be necessary.
The Final Phase
After your passing, the successor trustee would take over the administration duties. They would open up lines of communication with the beneficiaries, and they would identify and secure the assets.
Copies of the death certificate would be obtained, and the Department of Health and the Social Security Administration would be notified. The trustee would obtain an Employer Identification Number from the IRS, and taxes and other debts would be paid.
Ultimately, the assets would be distributed to the beneficiaries under the terms that have been set forth in the trust agreement. As we touched upon, this can be a long-term process, or all the assets can be distributed quickly and the trust will cease to exist.
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Need Help Now?
If you already know that it is time for you to work with a Burlington, Vermont estate planning attorney to put a plan in place, we are here to help. You can send us a message to request a consultation appointment, and we can be reached by phone at 802-879-7133.