Smooth Sailing for Trust Creation and Administration

How to Help Clients Smoothly Navigate Estate Planning During Life and After Death

Helping clients with estate planning in advance is extremely beneficial to family members when their loved one passes away or becomes ill. But what happens after your client dies? What does a Trustee have to do in order to settle the person’s affairs and administer their estate? 

These are common questions that need to be addressed in order for a Trustee to be able to smoothly sail through administration including:

  • Is there clear language in the Trust?
  • Are all assets accounted for?
  • Are beneficiaries current on every policy/account?
  • Has the best trustee been selected by your client?

Clear Language in the Trust
Since the Trust (or Will if there is no Trust) is the set of instructions that's given to the Trustee should the Settlor become unable to manage their own affairs or die, the instructions must be as clear as possible regarding distributions, beneficiaries and timing. This can involve making certain the beneficiaries, including charitable beneficiaries, are absolutely identified. When naming a charitable beneficiary, it's also important to ensure the charity named is a 501(c)(3) organization and that the tax ID number for the organization is included. 

It is important to note: Charity addresses and even names can change, but tax ID numbers do not.  

Account for All Assets
These days, some clients hold assets beyond cash, financial accounts and real estate. They have digital assets that may include hardware, software, photos, videos, NFTs and social media accounts. Make sure your client inventories digital assets and who would receive them. Also, have your client provide the Trustee with the websites, account numbers and passwords, so they can easily find, access and distribute these assets. Clients can name a Digital Executor to help settle them. This designation is not legally binding in most states, but a Digital Executor can assist the regular Executor. A planner can also mention these assets in a General Assignment that is part of the estate plan so they're included in the Trust and avoid a probate – especially if there are social media accounts that generate income.

Clients may also have intellectual property such as trademarks, copyrights and patents.  They might have royalties, cryptocurrencies, wine collections, businesses, credit card and airline points and even animals.  A caretaker may be designated, and funds set aside for the animal’s care in a “pet trust."  

What happens when a client who owns a business dies? Are there partners (and patrons) to consider?  The Trustee will have to close or transfer that business – or at least the decedent’s share of the business – and that may require an appraisal, but it will also require a plan.  Part of that plan can be set out in the Trust if, for example, the client wants to gift their business – or their share of a business – to someone upon the client's death.  But these instructions also must be set out in an Operating Agreement for the Business that addresses what happens when the owner (or one of the partners) dies.  So, be sure clients who have businesses do some sort of planning. 

If the business is of significant value, it should also be transferred into the Trust (possibly via a Corporate Assignment) to avoid a potential probate of the business. Loans and leases related to the business must also be taken into account.

All these assets must be considered in estate planning. The Trustee must be able to ascertain these assets and understand what the client wants for their distribution.

Making Sure the Beneficiary Designations Are Current for Every Policy and Account
One of the most important things practitioners can do is help clients to be certain they have beneficiaries designated in their Trust and on every one of their accounts and policies. Beneficiary designations made by filling out Beneficiary Designation forms with financial institutions will override beneficiaries designated in a Will or Trust. 

If a client dies without a beneficiary designated or gets divorced and does not update their beneficiary designations before they die, it may force a probate depending on the type and value of the asset.  To be safe, clients should designate a primary beneficiary and a contingent beneficiary.  

Clients can designate their Trust as a primary or contingent beneficiary, depending on the type of account. They can also open an account in the name of their Trust, which is helpful. If all the accounts have beneficiaries designated who are not the Trust, there may be no funds in the Trust itself to pay for the expenses of estate administration.

It is useful for clients to keep a copy of their Beneficiary Designation forms so the Trustee can have them readily available.  If a client does not have family, they can designate their favorite charities as beneficiaries. This will not only help them leave a lasting legacy but also avoid probate and possibly taxes for the estate.

Selecting the Best Trustee
Advise clients to choose a Trustee they have faith in, who's good with finances, and who's likely to be alive to administer the estate after they die.  If nobody they know fits that description, a client can select a professional or corporate fiduciary.  Be sure to inform the designated Trustee about their responsibilities when the client dies or is incapacitated.

In any event, a Trustee is responsible for executing the instructions in the Trust as well as filing certain paperwork with the state, Internal Revenue Service, Court and the County where the Settlor resided.  

It's important to note: Most of the Trustee's required tasks can't be done without a death certificate.  

Administering the Estate
Each state has its own probate/estate laws. While there is a Federal Estate Law, each state has an estate administration process governed by the probate laws of that state, even if there is not a probate. Depending on the state, the probate process can be cumbersome, involved and expensive or smooth, easy and inexpensive. 

Here are general steps for administering an estate:

  • Assemble important documents. Make sure the Trust (and/or Will) is somewhere where the client or their family can conveniently find them.  
  • Other important documents may include insurance policies, deeds and Beneficiary Designation forms.  Advise your clients to keep copies of their Beneficiary Designation forms so that it is easy to see the current beneficiaries on their policies and accounts.
  • Order several certified copies of the death certificate.  The Trustee will not be able to deal with the financial and governmental institutions without death certificates.
  • Determine the people involved such as the estate representative(s), beneficiaries and heirs.  Get names, ages and addresses for all of them.
  • Explain the duties to the Trustee:
  • Faithfully administer the Trust in the interest of the beneficiaries.
  • Invest prudently.
  • Don't commingle assets.
  • No self-dealing.
  • No fraud.
  • Inform and account to the beneficiaries.

If any of these duties are breached, the Trustee could be personally liable for the consequences.

In conclusion, administering an estate is a detailed process that requires an informed Trustee who can bring a team of experts together to help execute the client’s instructions.  Advisers can help the client be as clear as possible with instructions, reminding them to designate beneficiaries and maintain records and help administer the Trust when the time comes. 

Need a brochure to help simplify the planning process for your clients? Request the Importance of Proper Planning brochure.

About the Author

Bonnie Harris Hayden, Esq.
Senior Advisor, Charitable Estate Planning
(310) 770-4565
[email protected]

Bonnie develops and maintains relationships with wealth advisors and estate planning attorneys to raise awareness for the critical work of the American Heart Association by serving as a knowledgeable resource of charitable giving. She is based in Los Angeles, California, and covers ten western states.