The process of identifying and collecting assets; paying debts, expenses and taxes; and making proper distributions of remaining assets after one’s death is referred to as estate or trust administration.
The identification of assets begins with the inquiry as to how assets are titled. Assets that are jointly held with survivorship will pass automatically to the survivor; assets that have a beneficiary designation will go to the person(s) so designated. Assets held in a trust are to be administered pursuant to the instructions provided in the trust document. Assets in a person’s sole name must be administered pursuant to the terms of his/her will or, if none, by the laws of intestacy (that is, death without a will).
The collection of assets depends on who may access the deceased person’s assets. With respect to assets held in a trust, the trust document typically designates someone (individual or financial institution) as Trustee. A person who established the trust (the Settlor or Trustor) often designates himself/herself as trustee. Upon his/her death, a successor trustee is typically named in the document. In other words, the trust document itself gives the successor the legal authority to administer the assets.
If assets are administered under a will, an Executor (sometimes called “Personal Representative”) is named to administer assets. If there was no will, an heir (or sometimes a creditor) may step forward to be the Administrator. In either case, however, the Executor or Administrator must apply to the local court having probate authority to qualify as such. This begins the process referred to as probate. This process can vary greatly from state to state.
The administration of the estate of a deceased person can be viewed as:
- determining the extent and nature of the deceased person’s assets,
- transfering title of assets to obtain legal control,
- paying debts, expenses and taxes, and
- distributing the remainder pursuant to the terms of the trust, will, or laws of intestacy.
This person may be an Executor under a will, or an Administrator in intestacy, or a Trustee under a Trust. Sometimes the documents require that the assets be held in trust for an extended period such as for the life of a beneficiary or until the beneficiaries reach a certain age. By the end of the process, there should be no assets left in the name of the deceased person.
Estate and trust administration takes time. How much time depends on several factors: Can the original documents be located easily? Is real estate among the assets? Are the assets easily liquidated? Are there estate or income taxes to pay? Who is the executor or trustee? Who are the beneficiaries and can they be located? Are there any provisions in the trust or will that are unclear? Are there significant assets which were held jointly or passed by beneficiary designation? Were the rights of the surviving spouse addressed in the documents?
As with estate planning, the complexity of the administration of an estate or trust is affected by the beneficiary list and decedent’s financial holdings. Anyone who has served as Executor, Administrator, or Trustee can attest that these are positions of great responsibility. For most clients, service in such a position is a once in a lifetime role. Most people finding themselves with such responsibility can benefit from legal and accounting guidance throughout the process.
The foregoing article contains general legal information only and is not intended to convey legal advice.
Daniel D. Smith and W. Franklin Pugh are partners in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176 (703-777-6084, www.smithpugh.com).