The Importance of a Trust Administration Checklist

Whenever someone passes away, it’s essential to have a trust administration checklist in place. This checklist can help to avoid common mistakes that can lead to expensive litigation and unfavorable tax outcomes. The checklist also includes essential considerations for the decedent’s creditors.

Notify creditors

Having a trust administration checklist in place will help ensure that the administration process after a spouse’s death goes smoothly. The checklist contains a list of duties and liabilities a trustee must carry out. It also contains a list of common sub-trust structures in family trusts. It should also be noted that the Internal Revenue Service (IRS) may take action against a trust beneficiary for unpaid taxes.

A trustee should be careful when disbursing the assets of the trust. The IRS has special lien statutes that apply to the distribution of property from the trust estate. In addition, a trustee is personally liable for unpaid taxes under IRC SS 3713(b) and the Federal Claims Priority Act. Being proactive, responsive, and reasonable when disbursing the estate’s assets is also essential. Also, the trustee should take care of the needs of animals, disabled adults, and minor children.

Establish a Bank Account to Pay Trust Expenses

A trust checking account can be a great way to pay trust expenses. Whether you need to pay a bill or want to distribute assets to your beneficiaries, a trust checking account can help.

Before establishing a trust checking account, it’s essential to consider all the options. Banks and other financial institutions have their requirements, varying from state to state. Depending on your bank, you may be required to provide tax forms, proof of legal status, and other documents.

Trust checking accounts can be used to pay trust expenses, such as taxes, fees, and insurance policies. The funds may come from savings accounts or life insurance policies. You’ll need to keep track of the funds in a separate ledger.

If you have a lot of money, you may need to open a new interest-bearing trust account. Some private banks offer mutual fund trusts. However, you may have to pay a fee to establish a trust checking account, and you may be required to maintain a minimum balance.

Trust checking accounts are insured by the FDIC up to $250,000. This insurance may only cover some of the costs, so it’s essential to check with your bank.

The amount of FDIC insurance required depends on the number of Beneficiaries. You’ll also want to discuss the funding methodology with your trustee. For example, you may need to open a separate account for each person named as a Beneficiary. Alternatively, you can use an investment account to distribute funds to beneficiaries.

Consult with the Decedent’s CPA

Having an estate plan in place can be an excellent way to avoid probate. However, estate planning only covers some things. The advice of a CPA when administering a trust is essential.

Trusts vary in size and complexity. Every trust is unique. Each has its assets and beneficiaries. An individual CPA can provide a valuable service by advising trustees and executors.

A CPA can help with a variety of tasks, including preparing a formal accounting of the estate. This should include an analysis of every expense and asset. Each item must be justified.

A CPA can also help with the tax aspects of an estate. Many tax elections can save a significant amount of money. An executor must prepare a fiduciary income tax return to file with the IRS. In addition, the executor must present a formal accounting of the estate.

A successor trustee must show loyalty to all trust beneficiaries. In addition, the successor must keep the trust’s assets separate from their assets.

A CPA can help an individual fiduciary avoid personal liability by ensuring the trustee does not misbehave. The CPA can also help an individual fiduciary avoid statutory interests and lost opportunity costs.

A CPA can also advise an individual fiduciary on what property to place in the trust. They can also work closely with a financial advisor and lawyer to help achieve the estate goals.

Keep Safe Legal Documents and Records

A crucial component of trust management is finding all legal documents and keeping them safe. Proper estate planning will have all necessary documents in one safe location, but this might not be the case.

When you’re in charge of administering a trust, it’s crucial to do your research and ensure that no assets have been left out of the trust documents or that any vital documents have been lost or forgotten.

Pay Debts and Expenses of the Trust

Part of trust administration involves paying a trust’s expenses and paying off any obligations the trust could have. Before recipients can receive distributions, this must be completed.

Although not required, it is recommended that all trust creditors be advised to make payments as the trust administration process has begun. The deadline for the creditor’s claim begins with the notification. If a creditor files a claim after the start of the period, the trust does not have to pay that creditor.


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