Let Our Estate Planning Attorneys Help You Administer A Revocable Living Trust

Avoiding probate is often part many estate plans, and using revocable living trust as a will substitute can successfully avoid probating trust assets. However, many clients (and their after-death trustees) are often misinformed or misunderstand a trustee’s obligations beyond simply “distribute the assets and walk away.” Revocable living trusts are not equivalent to direct-beneficiary designations on a bank account, insurance policy, or retirement account. While a properly drafted revocable living trust does make clear who inherits after the grantor’s passing, Florida law explicitly lays out the administrative steps that must be followed by a trustee prior to distributing trust assets.

In addition to following the statutory requirements of a trust administration, Trustees have both ethical obligations that apply to their relationship with interested parties as well as their handling of trust assets (including payment of trustee commissions, attorney fees, taxes and creditor claims). Trustees who make premature distribution of assets or otherwise fail to adequately follow best-practices when administering the trust may find themselves laying out personal funds to defend themselves against a claim for breach of fiduciary duty or other actions brought by disgruntles or aggrieved parties. Removal of the trustee as well as monetary damages (surcharging) are possible consequences for a trustee who violates these obligations.

All trustees should seek the advice of a qualified trust attorney to properly advise them of their obligations. Utilizing the services of other professionals, such as a certified financial planner and CPA may also be prudent. This helps protect both the trustee as well as the trust beneficiaries and other interested parties by ensuring proper administration of the trust and responsible management of trust assets.

The Basic Duties And Obligations Of A Trustee

Specific responsibilities of the trustee include, but are not limited to, the following:

• Filing a notice of trust with the probate court (F.S. 736.05055).
• Filing the grantor’s last will & testament with the probate court within 10 days of death (if in the trustee’s possession) (F.S. 732.901).
• Providing proper notice to all qualified beneficiaries of the trust (F.S. 736.0813).
• Obtaining a tax ID number for the trust.
• Notifying appropriate financial institutions of the grantor’s death and re-titling or otherwise consolidating trust accounts and assets.
• If trust assets include real property, taking appropriate protective measures (such as securing the property and timely payment of utilities, maintenance, taxes and insurance).
• Ensuring that appropriate tax returns are timely filed (possibly including the grantor’s final return) and any tax obligations are satisfied.
• Providing proper accountings to all appropriate parties or obtaining waivers of accounting (F.S. 736.0813).
• If necessary, ensuring that all estate creditors are satisfied prior to distributing trust assets. This may include opening a probate administration to properly notice creditors and handle any claims.

Trust Assets May Be Needed To Satisfy Creditor Claims

One common misconception is that revocable living trust assets are protected from claims by a decedent’s creditors after their death; this is incorrect. While payment of creditor claims is first an obligation of the decedent’s probate estate, should the probate estate contain insufficient assets to handle these claims then payment may be sought from revocable living trust assets. Creditors have two years from date of death to file a claim against a decedent’s probate estate, and the trustee is responsible for any distributions made without first ensuring creditors are satisfied or otherwise barred.

A Trustee’s Work Is More Complex When There Are Ongoing Obligations

Proper administration of the trust becomes more imperative when the trust contains ongoing obligations of the trustee, such as when trust assets are to be held for a period of time before distribution to a beneficiary. This may occur when the beneficiary is a minor  or has special needs or disabilities that precludes an outright distribution of trust assets. In these circumstances, the trustee’s obligations may continue for many years after the grantor’s death.

When a trust includes beneficiaries with special needs, the trustee may be obligated to establish further trusts for the benefit of the disabled individual. These supplemental needs trusts (“SNT”) carry with them their own duties and obligations, such as properly noticing the Social Security Administration and the state Medicaid agency of the existence of the trust, as well as ensuring that all trust distributions are made so as to maintain the beneficiary’s eligibility for need-based public benefits.

Making Prudent Decisions Regarding Trustee Compensation And Expenses

Most trusts allow the trustee to seek compensation (a commission) for their work as trustee. Likewise, trustees may reimburse themselves or pay from the trust proper expenses incurred when carrying out their duties as trustee. However, trustees should not take this as carte blanche authority to spend trust assets (e.g., expensive meals and first-class travel). Trust beneficiaries are entitled to an accounting of trust activity and may object to expenditures  that appear improper. Trustees may find themselves in the position of defending questionable use of trust assets. As noted above, all trustees should seek the advice of a trust attorney and other professionals to minimize the risk of liability for failure to properly administer the trust.

Learn More During An Initial Consultation

To discuss the administration of a revocable living trust with one of our experienced attorneys, contact us in Coral Springs to schedule a consultation. Just call 954-228-6074 or fill out our online contact form. We serve clients throughout South Florida.