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Burlington, VT office 802.540.0529
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Trust Administration

Trust administration can be easy. If you have a simple trust without complex provisions necessary to shelter your property from federal estate taxes, and if your successor trustee and all of the beneficiaries get along well with one another, everyone can agree to cut a few corners and make the process simple.

Generally, the beneficiaries of a trust have the same rights to an accounting of the trust that heirs do with respect to a probate estate. The difference is that the court is not looking over the shoulder of the successor trustee to make sure that everything is done correctly. If the beneficiaries of the trust are not willing to waive an accounting, then the successor trustee, like an executor, has to keep the books and make sure that everything is squared away. Generally, the trust administration process is still much better than probate, because the trustee and the attorney fees will be less and the process will be quicker.

Many successor trustees are sophisticated enough to manage this process on their own, but many are not. If you are the successor trustee of a trust, and it comes time to start dividing up the property, then you should consult with an attorney to see what has to be done to protect yourself from liability. A successor trustee who fails to carry out the terms of the trust can be held personally responsible for a breach of fiduciary duty, even if the successor trustee acted in good faith.

Also, if you and your spouse created trusts to protect you children's inheritance from taxes, then, after one spouse dies, the surviving spouse, as the sole trustee of the trust, has a duty to conduct a trust "split." Usually the deceased spouse's separate property and community property is put into a "bypass" or "credit shelter" trust created to prevent the deceased spouse's property from being subject to federal estate tax after the surviving spouse's death. If the surviving spouse does not do the trust split, then the A/B trust will not work and the federal estate tax may have to paid to the IRS.

Administering a trust during an A/B split is very complicated and should be done with the help of an attorney and an accountant, both of whom are experienced in estate work. This process can be expensive and time consuming, but when you consider the potential tax savings, it is worth it.