What is Trust Administration?

Close up hand of man signing document - trust administration concept
A trust is a crucial estate planning tool that can help ensure your assets are protected and passed to a beneficiary of your choice. While creating a trust can help to avoid probate and ensure your property is distributed in accordance with your wishes, it’s important to understand that there are a number of steps that are associated with managing the trust and distributing the assets in it. Trust administration is the legal process by which the trust assets are distributed according to the instructions provided in the instrument.

What is a Trust?

A trust is a legal tool that can be used to hold and manage property for a beneficiary. They can preserve your assets and control how your wealth is distributed. In order to create a trust, an instrument must be drafted that identifies the assets and specifies how they will be distributed. The trust must also be funded — this means that assets or property must be transferred into the trust by changing any titles to the name of the trust. There are many different types of trusts that can be created and it’s vital to carefully consider your objectives. For instance, while some trusts can be set up to avoid probate, others are structured to minimize estate taxes or to provide for a disabled beneficiary while protecting their right to receive government benefits. Trusts can also be established to provide for your pet or to pass assets to a charity of your choice.

What is Trust Administration?

Trust administration refers to the process of managing and handling a trust. Although a trust can be used as an alternative to the probate process, there are still many tasks that must be carried out before a beneficiary can receive assets. Under Oregon law, there are a number of steps a trustee must take to properly administer a trust, including the following:
  • Provide notice to beneficiaries
  • Determine whether there are assets titled outside the trust requiring probate
  • Deal with creditors
  • Pay debts and expenses
  • File the decedent’s income tax return
  • Ensure trust assets are properly valued
  • Prepare an accounting
  • Distribute the trust assets in accordance with the instructions
Under Oregon law, a trustee must comply with many crucial duties. Specifically, during the trust administration process, a trustee must adhere to the fiduciary duties of loyalty and good faith — this means that they must act solely in the interests of the beneficiaries when it comes to administering the trust. A trustee also has a duty to keep beneficiaries informed regarding the administration of the trust and must promptly provide a copy of the trust instrument upon request.

What Happens if a Trustee Does Not Carry Out Their Duties During Trust Administration?

If a trustee fails to perform their duties, they have committed a breach of trust. There are a variety of remedies available under Oregon law for a breach of trust. For example, a court may compel the trustee to perform their duties, enjoin the trustee from committing a breach of trust, order the trustee to account, or appoint a special fiduciary to take possession of and administer the trust property. A judge may also determine that the trustee should be suspended, removed, or denied compensation — along with ordering any other relief deemed appropriate.

What Happens to Assets Not Included in a Trust?

Assets and property that are not contained in a trust would not go through the trust administration process. Rather, they would be subject to the court-supervised probate process. In such cases, unless there is a will that names the beneficiaries, property is distributed in accordance with Oregon’s intestate law. Similarly, if a trust instrument is invalid for some reason or the trust was not funded properly, it would be as if a trust had not been created and the assets would go through the public probate process. Leaving assets out of a trust ultimately defeats the purpose of having created one. It can also result in unintended tax consequences — and your property being distributed in a way that does not satisfy your wishes. This is why it’s essential to work with an experienced estate planning attorney who understands how to skillfully draft a trust instrument and carry out the procedures necessary to ensure the trust is funded.

Contact a Knowledgeable Oregon Estate Planning Attorney

If you require assistance with the trust administration process, it’s best to have a diligent attorney by your side who can guide you through the process. Based in Salem, Litowich Law provides clients throughout Oregon with committed counsel for estate planning and trust administration matters. We welcome you to contact us to schedule a consultation to learn how we can help.
Categories: Estate Planning