Difference Between Administering Trusts and Estates
If you want to learn about the difference between administering trusts and estates, get in touch with Kevin C. Martin, Attorney at Law, PLLC today. We can answer your questions.
Choosing Between Estate and Trust Administration
In estate planning, the terms trust administration and estate administration often arise. While they share some similarities, they also have distinct processes, purposes, and procedures.
Trust administration involves managing and distributing assets held within a trust, while estate administration focuses on settling a deceased individual’s affairs and distributing their assets according to the will or intestate succession laws.
Understanding trust and estate administration differences is essential for effective estate planning. This article will explore the basics of trusts and estates, discuss the roles of trustees and estate executors, and outline the steps involved in trust and estate administration.
The Basics: What are Trusts and Estates?
What is a Trust?
A trust is a legal arrangement created by an individual, known as the grantor or settlor, to hold and manage assets to benefit one or more beneficiaries. The grantor establishes the trust either during their lifetime or through their will. What is an estate trustee? The trustee manages and distributes assets placed in the trust according to the instructions outlined in the trust document.
There are several types of trusts in DC. Revocable living trusts and irrevocable trusts are just some of them. An irrevocable trust, unlike a revocable trust, can’t be changed by the grantor once it is created and funded.
Trust administration involves distributing trust assets and carrying out the wishes outlined in the trust when the grantor dies. Trust administration is primarily concerned with distributing trust assets when the grantor dies. Trusts typically bypass the probate process, resulting in a more efficient distribution of assets.
What Is an Estate?
An estate refers to the total sum of an individual’s belongings, including property, investments, bank accounts, and personal belongings, at the time of their death. Estate planning involves preparing to manage and distribute these assets after the individual’s passing.
After a person’s death, their estate goes through an estate administration process. It is a court-supervised process that allows interested parties, such as beneficiaries and creditors, to make a claim against the estate. It also provides the probate court a way to ensure the decedent’s estate administration is done according to the person’s will or intestate succession laws if that person died without a will.
According to Gallup’s 2020 survey, only 46% of adults have a will describing how they would like their estate and money to be handled after death.
Roles Involved in Administering Trusts and Estates
The Role of a Trustee
The trustee is responsible for managing trust assets and following instructions specified in the trust document. However, the trustee’s job may begin even during the trustor’s lifetime and continue for years after they pass away.
Trustee’s responsibilities can include:
Gathering all necessary documents, including the trust document, financial statements, and legal records
Identifying, collecting, and safeguarding the trust assets
Making investment decisions on behalf of the trust and ensuring that the assets are properly managed
Accurate and detailed record-keeping of all trust-related transactions, distributions, and financial activities
Distribution of assets
Trustees have a fiduciary duty to act in the interest of trust beneficiaries while adhering to the terms of the trust and following the law. A breach of fiduciary duty can result in a court order requiring the trustee to pay back money damages for the harm caused by the breach.
The Role of an Estate Executor
In estate administration, an executor, also known as a personal representative in DC, is appointed to manage the estate’s affairs.
Responsibilities of a personal representative often include:
Initiating the probate process by filing a will and a petition with the probate court to be appointed as the estate’s executor
Evaluating the value and nature of the estate assets and creating an inventory of all assets
Identifying and paying any outstanding debts or claims against the estate
Ensuring all required tax returns are filed accurately, and any taxes owed by the estate are paid
Representing the estate’s interests in legal proceedings, such as will contests or disputes
Distributing assets to beneficiaries
Moreover, a personal representative, like a trustee, also has a fiduciary duty. They must consider the interests of all parties, beneficiaries, and creditors fairly. If they don’t, they can be liable for the resulting damage or loss they have caused.
The Legal Processes: Trust vs. Estate Administration
Steps in Trust Administration
Trust administration typically involves the following steps:
Notifying all relevant parties, such as beneficiaries and financial institutions, of the grantor’s passing
Paying debts or claims against the trust assets
Asset management and investment
Distribution of the trust assets
Trust administration also allows for addressing the tax implications associated with the distribution of wealth. Proper trust administration can also help reduce the risk of disputes.
Steps in Estate Administration
Estate administration typically involves the following steps:
Filing the will and a petition for probate
Filing a notice of appointment of a personal representative
Notifying beneficiaries and creditors
Identifying the decedent’s assets
Taking inventory and asset evaluation
Paying debts of the estate and creditor claims
Filing tax returns
Asset liquidation or distribution
Final account and closing
In general, estate administration is established by the DC laws for identifying the decedent’s assets, paying debts, and distributing the remaining assets. The probate administration process is necessary if the decedent died owning assets in their name solely. But, sometimes, probate can be avoided. Creating a living trust is just one way to avoid probate estate.
Everyone can benefit from a detailed estate plan regardless of financial standing or age. At Kevin C. Martin, Attorney at Law, PLLC, creating estate plans is an individualized process that requires finding solutions that make sense for each client. Call us to get started with your estate plan.
Making the Right Choice: Trusts vs. Estates
When determining whether to use a trust or a will for estate planning, several factors should be considered:
Privacy: Using a trust can help avoid the public disclosure of assets and beneficiaries.
Probate avoidance: Trusts can bypass the probate process, allowing for a more streamlined transfer of assets.
Complexity: Trusts offer more flexibility and can include special needs beneficiaries. However, trust administration can be more time-consuming than estate administration.
Asset protection: Trusts can provide asset protection from creditors or future lawsuits.
Cost: Trusts may require upfront costs for creation and funding.
Despite the many advantages of using a trust, you cannot name a guardian for your minor children using a trust. In that case, a will must be drafted to name the guardian. Unlike wills, however, some trusts allow for the distribution of trust assets to children when they reach a certain age.
The decision between trusts and estates ultimately depends on individual circumstances, goals, and preferences.
Have More Questions on Trust and Estate Administration? Contact Us Today!
There are many differences between probate and trust administration. The most significant difference is that probate and estate administration, as such, require court supervision, whereas a trust doesn’t.
If you want to ensure the smooth administration of assets, the advice and guidance of a skilled legal professional are essential. Furthermore, an experienced estate planning attorney can answer all the relevant questions, including how long an estate administration lasts.
For any additional questions or estate planning services, don’t hesitate to contact Kevin C. Martin, Attorney at Law, PLLC.