A popular estate planning tool involves establishing a “Living Trust” also known as a “Revocable Trust.” The person establishing a Living Trust is known as the “Grantor” “Settlor” or Trustor.” In order to establish such a trust, the Grantor executes a document which sets for the terms of the trust. The trust instrument or trust agreement is executed with most of the same formalities of a last will and testament, i.e. witnessed by two witnesses who sign in the presence of the Grantor and of each other.
The trust instrument designates a person or entity, known as the “trustee,” to be in charge of administering the trust. In many Living Trusts, the Grantor acts as the initial trustee but designates who will take over as successor trustee upon the death or incapacity of the Grantor. Upon the death or incapacity of Grantor to act as trustee, the successor trustee must step in and fulfill various responsibilities. This article is intended to assist successor trustees in knowing what those responsibilities are and how to fulfill them. The matters set forth herein provide a general overview of trust administration. The specifics of each case may vary and therefore the trustee should seek legal counsel in accomplishing each of these steps.
Overview of Trustee’s Duties. A trustee is a fiduciary and is held to a high standard when it comes to administering a trust. In particular, a trustee has a duty to act in good faith and in accordance with the terms and purposes of the trust and of the interests of the beneficiaries. The successor trustee has a duty to inform and account. This means that the trustee must provide all qualified beneficiaries with the Notice of Trust described below along with a copy of the trust instrument. It also means that, if requested, the trustee must provide all beneficiaries with relevant information about the assets and liabilities of the trust and the particulars relating to administration.
Acceptance of Trustee. Upon the death of the Grantor, the successor trustee must take steps to undertake his or her appointment as successor trustee. This can usually be accomplished by the successor trustee signing an Acceptance of Trustee accepting appointment and agreeing to administer the trust. Most often, the Acceptance of Trustee is prepared by an attorney who practices trust administration law. The Acceptance should contain the name of the Grantor, and the name and address of the successor trustee.
Trust Identification. Once in place, the successor trustee should be aware of and perform certain trustee responsibilities. The source of these responsibilities is from 1) the trust instrument itself and 2) from certain Florida
Notice of Trust. Next, the successor trustee should file a Notice of Trust as required by Section 736.05055, Florida Statutes. The Notice of Trust must be filed with the court of the county of the Grantor's domicile and the court having jurisdiction of the Grantor's estate. The Notice of Trust must contain the name of the Grantor, the Grantor's date of death, the title of the trust, if any, the date of the trust, and the name and address of the trustee. The Notice should be done as soon as possible after Grantor’s death, but in all events no later than 60 days after his/her death. If the Grantor's probate proceeding has been commenced, the clerk shall notify the trustee in writing of the date of the commencement of the probate proceeding and the file number.
Initial Accounting. The successor trustee should immediately begin to identify and take control of the assets or property held in the trust. In connection with this step, the successor trustee will need to provide the beneficiaries with an Initial Accounting. As the assets of the trust are identified, the information needed to provide the initial accounting can be gathered. The initial accounting should include the assets in the trust together with their estimated value at the date of death. The successor trustee should keep thorough records of all assets and property which come into or which are distributed from the trust. These records will be used to provide the interim (if any) and final accountings. If administration continues in excess of one year from the initial accounting, it is advisable for the trustee to provide an annual interim accounting each year until the trust is terminated.
Place of Administration. The successor trustee should designate a principal place of administration for the trust. Florida
Tax Id Number. During the Grantor’s lifetime, the trust used the Grantor’s Social Security number as a tax identification number. Upon Grantor’s death, a new Trust Tax Id. number for the trust must be obtained. This can be done through use of a SS-4 which can be prepared by an attorney or a CPA.
Creditors. The trust is obligated to pay for any legitimate expenses of the Grantor’s estate. In order to determine the existence of valid claims, it is advisable to publish a Notice to Creditors. This Notice should also be sent via certified mail to any known creditors of the Grantor. Creditors have up to 3 months after publication or 30 days after actual receipt of the Notice to Creditors to serve a claim. In connection with claims of creditors, the trustee should also determine what, if any, taxes must be filed and/or paid. Once the Grantor is deceased, the trust becomes irrevocable and taxes must be paid by the trust on any income earned by trust assets. This means that for each year after the Grantor’s death, the trustee is likely going to be filing a tax return for the trust. The trustee is best served in addressing the tax issues by obtaining the advice of a CPA or other tax professional.
Once all of the trust assets are under trustee’s control and once the creditors and taxes are identified, the valid claims of creditors can be paid and the remainder of assets administered and distributed as described in the trust. If creditors are paid, it is advisable to have them sign a receipt for the payment made. If a distribution is made to a beneficiary, it is best to have the beneficiary sign a receipt for partial or total distribution.
Final Accounting. When all creditors have been paid and all trust assets have been distributed, the trustee should either provide a final accounting for the trust or get all beneficiaries to execute a waiver of final accounting. If the trust is one which has been court administered, the trustee should obtain an order of discharge from the local probate court.
