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Living Trust Administration

If the decedent had a living trust and no assets were left outside the trust, the estate does not have to be probated. But, it still must be settled. The settlement of a living trust estate is similar to the settlement of a probate estate with the exception that it is done outside the court system.
The major steps to settle a living trust estate are as follows:
  1. Collection, Inventorying and Appraising the Estate.  The trustee must marshal the assets of the trust just as the executor or administrator must marshal the assets of a probate estate. The trustee is also responsible for creating an inventory of the trust assets. While the trustee does not have to engage the services of a probate referee, the trustee must get all of the assets of the trust appraised.

  2. Resolution of Creditor Claims.  Like a probate estate, the trustee is responsible for the claims of creditors. Unlike a probate estate, there is an optional creditor claims procedure that the trustee can employ. The optional claims procedure is substantially the same as the mandatory one used in probate and imposes a four month period of time within which creditors must file a claim or be forever barred. If the trustee elects not to employ the claims procedure, there is a general one-year statute of limitations for a creditor to file suit against the trust.

  3. Disposition of Assets.  Like the executor or administrator of the estate, a trustee may need to sell assets of the estate. Unlike the executor or administrator, court approval is not required. Nor is a notice of proposed action required.

  4. Taxes.  The trustee’s duties relative to taxes is virtually the same as the executor’s duties.

  5. Preliminary Distributions.  The trustee may make preliminary distributions to the beneficiaries at any time and without court approval.

  6. Trustee’s Report and Accounting.  Like the executor or administrator, the trustee must provide a detailed report and accounting to the beneficiaries of the trust, unless all of the beneficiaries waive this requirement. However, the report and accounting do not have to be submitted to the court for approval prior to distribution.

  7. Distribution of Estate.  The last major step for the trustee is to distribute the trust assets to the beneficiaries or continue to hold and manage the assets for the beneficiaries’ benefit, depending on the terms of the trust.

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