Trust Administration in Washington
At Gillin Law Group, our experienced Washington attorneys have helped many clients handle the many facets of estate planning and administration. For many of our clients, trusts are a complex but necessary part of their estate plan, and we are here to ensure that those trusts are administered properly through the entire process. Call our offices in Lynnwood, Washington at (425) 947-1130 to schedule a consultation with one of our attorneys.
What Is Trust Administration?
Trust administration can be confusing if you are not familiar with the concept of trusts. The most important thing to remember about trusts is that they are treated as a separate legal entity, where ownership is divided between the trustee and the beneficiary or beneficiaries. The trustee has legal ownership over the trust assets, meaning they are the ones who can administer the property. However, being a trustee also comes with a lot of legal responsibilities, both to adhere to the terms of the trust agreement as well as many statutory requirements. Beneficiaries, on the other hand, have only beneficial ownership of the trust assets, meaning that they may receive distributions from the trust according to the agreement, but otherwise are usually not allowed to touch the trust assets.
Trust administration refers to the process of gathering up all of the trust assets and setting up the trust so that it fulfills the settlor’s trust agreement. The process generally begins at the settlor’s death, and includes the following steps:
- Identifying and transferring real property into the trust
- Collecting all other trust assets and transferring them into the trust
- Paying debts and taxes
- Completing an accounting of the trust
- Making required distributions to the beneficiaries
How Does the Process Begin?
The process begins with the creation of the trust, where a person – called the “settlor” – creates a legal agreement where they agree to place certain assets in trust for the benefit of named beneficiaries. A settlor can either create a living trust, which takes effect while they are still alive, or they can set up a trust to go into effect when they die.
Trust administration occurs when the settlor dies and the trust takes effect. The trustee must send a notice to all of the trust beneficiaries and settlor’s heirs. This gives the heirs an opportunity to review the trust and submit any objections. If there are any objections, the heirs can submit a contest within 120 days. The notice must be served on each beneficiary and heir, either personally or by mailing it to them at their last known address.
An experienced attorney will know what this notice entails and help you ensure that it complies with all Washington laws. This is a critical step in trust administration, as it kicks off the entire process and alerts all of the relevant parties to the existence of the trust.
Dealing with Trust Real Estate
Settlors often place real estate properties in trust as they are income-producing properties that can pay off down the line for beneficiaries. The process of moving real estate into a trust can be complex, and there are numerous steps involved. Transferring real estate from the decedent to the trust is very similar to transferring property from one individual to another. An experienced Washington estates and trusts attorney will know all of the necessary documents to begin this transfer. For example, the successor trustee must obtain an Affidavit of Death of Trustee to prove that the original trustee (the settlor) is deceased. The new trustee must also obtain a change of ownership form for each piece of real property being transferred.
Real property is not the only type of property placed in trust. Other assets common placed in trust accounts include bank accounts, stocks, or any other type of income-producing property. These assets must also be transferred to the new trustee so they can properly distribute income to the beneficiaries.
The trustee is responsible for paying the trust’s liabilities. If the settlor owed any debts, the trustee may be required to pay these debts out of the trust property. The tax aspect of trust administration is usually the biggest headache. Not only must the trustee take care of the settlor’s income taxes, but they may also need to address estate tax issues. There is a fairly large estate tax exemption, but for particularly large estates, the settlor may owe estate tax in addition to income tax. An experienced Washington trusts attorney will help you identify any outstanding taxes and ensure that the settlor’s liabilities are properly paid.
One of the trustee’s most important responsibilities is keeping an accounting of the trust assets. Under Washington law, a trustee must submit a written itemized statement of all current receipts and disbursements made by the trustee of the funds of the trust both principal and income every year. This means that the trustee must diligently track all of the trust’s assets, as well as the income that they produce. While many trusts are managed by banks or other financial institutions, if you are not familiar with accounting practices, be sure to speak with an attorney as soon as you are appointed as a trustee, or else you may end up with an accounting mess on your hands.
Distributions and Trust Management
Once the trust is set up, the settlor’s taxes and liabilities are paid, and there is a reliable accounting system put in place, the trustee must then manage the trust according to the terms of the trust agreement. This typically means making regular disbursements to the beneficiaries. The trust agreement should provide guidance on how this is done, whether it is a fixed amount or according to the trustee’s discretion. Consult with an attorney to ensure you understand your responsibilities with regard to the assets. Another important responsibility of the trustee is to invest prudently. The point of a trust is to allow the assets to produce income for the beneficiaries, so as the trustee, you are responsible for making sure those assets are properly managed.
A Washington Attorney to Guide You Through Trust Administration
At Gillin Law Group, we are familiar with the trust administration process and help our clients avoid costly mistakes. Whether you are a brand new trustee who needs help getting started, or whether you are a trust beneficiary who wants to know more about your rights under the trust agreement, give us a call. We guide clients through the nuances of estate planning, trust administration, and probate, and we may be able to help you too.
Request a Consultation about Trust Administration in Washington
Resources on Wills & Trusts
We provide the following resources on Wills & Trusts in Washington State
It has been a pleasure to work with Brandon. Right from the initial consultation until the day my case was approved and green card was in hand, he is always accessible, responsive, reliable, and is extremely knowledgeable. His resource on timelines, procedures, current immigration laws and what to expect during the process from start to finish were explicit. I am in good hands and would not hesitate to highly recommend to anyone.
— Sanchita C.