Trust Administration in Gilbert

Trusts can accomplish a wide range of planning goals. Many people, however, assume that once they have created and funded a trust, it will go into effect automatically when the person who made the trust passes away. This is not the case. Beliefs must be administered appropriately to work how they were intended.

You should know that failing to administer a trust properly can have severe financial and legal consequences for the trustee and beneficiaries. Have you been asked to serve as a trustee? If so, we can explain the process and the potential risks for improperly administering the trust. If you want to serve as a trustee, we can guide you every step of the way. If you would instead not serve in this capacity, we can help you resign or decline to serve and help select the ideal person or institution to do so if you have the authority to name a successor.

Five crucial steps in Arizona trust administration

Trusts are often seen as the ultimate estate-planning solution, as they are an excellent way to get your financial affairs in order. However, creating a trust is not just a “set it and forget it” situation because trust funding and administration require time and associated fees.

Although this process is more accessible than a probate process, you should still seek the assistance of an experienced Arizona trust attorney, as trustees are required to fulfill multiple fiduciary duties when administering the trust.

These duties include compliance with federal law and Arizona state law, preserving trust funds, and ensuring the transfer of assets to beneficiaries of the trust occurs according to the trust’s terms. Trust administration can sometimes be time-consuming and complex, so hiring an Arizona attorney with experience in this field is best.

Please look at the steps you need to take for proper trust administration.

  1. Learn the Value of the Trust’s Assets

Sometimes, things are more accessible because the trust document provides details relating to trust assets. It would be best if you still determined the values of these assets at the time of death.  However, when these values are not readily available, it is your responsibility to investigate and come up with an accurate appraisal because the decedent’s net worth determines if the estate is subject to federal estate tax.

To begin, create an inventory to document trust assets, including the values of these assets at the time of death. You may also need to track any increases or decreases in these values during administration.

  1. Pay the Taxes

Although current tax law is very generous, the tax law sunsets at the end of 2025 and snaps back to much lower levels. Attorneys and accountants can guide you through the current tax laws and filings that must be submitted.

One of the most common ways to avoid estate taxes is through using exemption trusts. But certain tax filings must also occur to preserve a second step-up basis. Trustees must be prudent when making particular transfers to avoid additional income or capital gains taxes.

Please comply with stringent federal guidelines to avoid inadvertently increasing the estate’s tax obligations by a large sum.

Other tax matters that trustees must handle include filing the tax returns of the estate and the decedent. An experienced Arizona trust attorney can help you prepare the trust and avoid costly errors.

  1. Provide Beneficiaries with the Right Notices

According to Arizona trust law, anyone who could benefit from the trust can ask for copies of the trust document, and trustees must provide notice of this right. If the trust becomes irrevocable when the trustor dies, you must notify every beneficiary.

  1. Fulfillment of Duties

As a trustee in Arizona, you are obligated to perform certain duties. If you fail to meet these obligations, you could lose your trustee status and be forced to repay the trust for damages. Here are some of the most basic duties:

  • Follow the trust’s instructions and abide by its terms
  • Act in the best interests of the beneficiaries
  • Invest trust assets sensibly and cautiously
  • Protect the trust through diversification of investments
  • Treat each beneficiary equally with no bias
  • Never use the assets of the trust for personal benefit
  • Ensure trust property remains separate from personal property
  • Keep detailed records and provide beneficiaries with reports
  1. Be Aware of Your Powers

In Arizona, trustees possess certain powers that must be used in the trust’s best interests. Typically, you have the power to carry out every term of the trust unless it contravenes state law. Here are some of your powers as trustee:

  • Investing on behalf of the trust
  • Purchase and sale of assets
  • Buying insurance
  • Reasonable repairs to trust property
  • Issuing payments to beneficiaries

If you have been named as a successor trustee and need guidance regarding administration, contact an experienced Arizona trust attorney today.

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