How to Administer a Living Trust
A living trust is a document that allows a person, the trustor, to plan for how his estate is to be managed following his death. Trust administration occurs after the trustor dies, and the living trust is administered by a trustee, the person designated by the trustor to manage his estate. Administering a living trust is less costly and time-consuming than probating a will in court.
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Instructions
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Collect and compile an inventory of assets in the trust. Any and all assets that the decedent had ownership or control of must be included in the inventory. The inventory should include any assets that belonged to the decedent but which were not transferred into the trust at the time of her death.
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Re-title and transfer any estate property if it is not already included in the living trust.
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Appraise and value all of the assets in the inventory as of the date of the decedent's death. While written or formal appraisals are usually not required, they can be helpful for future tax reporting purposes.
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Obtain federal and state tax identification numbers. It is important to keep your personal banking and tax filings separate from any activity of the living trust. Tax identification numbers assigned to the trust ensure that the Internal Revenue Service and state entities respond to your filings and inquiries.
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File any federal (Form 706) and state taxes on behalf of the living trust if necessary. As of 2010, the federal estate tax has been repealed; however, it is scheduled to return in 2011. If you are required to file a federal and/or state tax return, it typically must be filed within nine months of the decedent's death. Failure to pay taxes on time can result in penalties and expose you, as trustee, to legal consequences for breach of fiduciary duties.
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Pay the decedent's final bills and creditors. This includes any bills that may have been incurred as a result of the decedent's illness and/or death and expenses incurred while administering the living trust.
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Distribute the trust assets according to the terms of the living trust. As trustee, you are obligated to follow the decedent's wishes, not your own, as expressed in the living trust regarding the distribution of assets.
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Tips & Warnings
Living trust administration requirements vary from state to state. Research specific state requirements that may apply to you.
Set up a filing system, separate from your personal affairs, for all trust documents and related items.
Proper valuation of assets is important because of tax consequences.
Depending on the number, type and value of assets in the trust, as well as any tax provisions therein, administering a living trust has the potential to be complex and may require the services of a specialized attorney and/or accountant.
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Resources
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