Answering the most common probate and trust administration questions to help you plan smarter.

Probate and Trust Administration

What is probate?

Probate is a court-supervised process for transferring a deceased person’s assets to the beneficiaries listed in his or her will. Typically, the executor named in your will would start the process after your death by filing a petition in court and seeking appointment. Your executor would then take charge of your assets, pay your debts and, after receiving court approval, distribute the rest of your estate to your beneficiaries. If you were to die intestate (that is, without a will), a relative or other interested person could start the process. In such an instance, the court would appoint an administrator to handle your estate. Once an administrator is appointed, the process would be similar to the process listed above if you had a will.

What are the pros and cons of probate?

The probate process has advantages and disadvantages. The probate court is accustomed to resolving disputes about the distribution of assets through a process with defined rules. In addition, the probate court reviews the personal representative’s handling of each estate, which can help protect the beneficiaries’ interests.

One disadvantage, however, is that probates are public. Your estate plan and the value of your assets will become a public record. Also, because lawyer’s fees and executor’s commissions are based on a statutory fee schedule, a probate may cost more than the management and distribution of a comparable estate under a living trust. Time can be a factor as well. A probate proceeding generally takes longer than the administration of a living trust. Discuss such advantages and disadvantages with an estate planning lawyer before making any decisions.

Does every estate need to go through probate?

No, not every estate needs to be probated. Instances that do not require probate include "small" estates; property passes to a surviving spouse; property is held in a living trust; property is held in joint tenancy; accounts with clearly delineated pay on death beneficiaries (POD) such as bank accounts, Individual Retirement Accounts, Life Insurance, and other assets that often name beneficiaries. The same assets that do not need to be probated require speacial attention when formulating an estate plan.

Doesn't having a Will avoid probate?

Unfortunately, no. A Will only provides the court a set of particlar instructions that come directly from the decedent, but the will still needs to be probated. In fact, if you only use a Will to drive your estate plan, you are certain to go through probate. Using a will in conjunction with a Trust, however, can help you avoid probate altogether.

What is trust administration?

If a person has a living trust, and successfully transferred his assets to his trust during his lifetime, then no probate is necessary to transfer his assets to his heirs at his death. The successor Trustee will take over management of the decedent’s assets immediately so that she can pay the decedent’s debts and distribute his assets to the proper beneficiaries.

How does trust administration work?

Although there is no formal probate, it is still essential that the successor Trustee follow the rules set forth in the decedent’s trust along with state and federal laws. Beyond the specific requirements of the trust, the successor Trustee will have to:

• Notify each of the decedent’s beneficiaries of the existence of the trust and their right to see the trust instrument

• Identify each of the decedent’s creditors, and either pay all outstanding bills or successfully negotiate with the creditor to lower or write-off the bill

• Diligently keep records and annually provide an accounting to each beneficiary (or obtain a waiver of the need for an accounting from each beneficiary)

• File the decedent’s final income tax return, file an estate tax return (if the decedent’s gross assets are greater than $5.49 million (2017)), and file fiduciary income tax returns if the trust earns income before it is distributed to the beneficiaries

• Obtain taxpayer identification numbers and open up new bank or brokerage accounts if new trusts are to be created for the benefit of minor, disabled, or other trust beneficiaries

• Distribute remaining assets to beneficiaries in a timely fashion.

Do I need an attorney to administer a trust?

As you can see above, there are particular guidelines a successor Trustee must follow in administering a trust. For that reason, a successor Trustee may find that the assistance of a qualified attorney and accountant will help immensely with these (and many other) tasks.

In trust administration, it’s assumed that the Trustee will act properly. However, if a beneficiary believes the Trustee is not complying with the terms of the trust instrument or the law, he always has the option of challenging the Trustee in Court. It is in a successor Trustee’s best interest to consult with an attorney or accountant before taking any action that could be considered unwise or unduly favor one beneficiary over another.

Conversely, a Probate Court assumes the executor will fail to complete the process of paying debts and distributing assets, so nearly each task must be approved by a judge. The process takes longer, but procedures are in place to ensure the executor will act honorably.