Trusts & Estates (Administration - Trust)

 

• A trust is a legal arrangement in which some assets of a grantor (the owner of the estate) are transferred into the trust, to be administered by a trustee (who can be either a specific individual or a legal entity adept at trust administration, and who generally receives some compensation from the trust) specified in the trust agreement (which contains all the instructions the grantor wants to impart to the trustee about how to administer the trust, and which should also specify a successor trustee in the event the original trustee is incapacitated or quits), who then holds title to whatever property has been placed in the trust (the "trust principal") for some particular purpose and in some particular manner specified by the trust agreement.

 

• A trust can be testamentary (meaning created and funded through the grantor's valid will) or a living trust (also known as an "inter vivos" trust), which is created and funded while the grantor is still alive.

 

• There are several disadvantages to having a will proceed through probate, such as a lengthy time delay that may extend for 20 months or more, all probate costs are paid from the estate assets so the net assets available to the beneficiaries at the end of the probate process may be severely diminished, and once a will is admitted to probate it becomes a public document so there is no way to keep secret any details about the estate assets or their value.

 

• On the other hand, an inter vivos trust is administered privately, without a lengthy court public process, the expenses to administer a trust are generally much less than probate costs, the trust administration process is more private than the probate administration process.

 

• The legal document establishing the trust is called the trust agreement (or trust deed), which details the terms of the trust, including naming the trustee, successor trustee, and beneficiaries, and it will also set forth the grantor's rules for how the trust is to be administered.

 

• Any the successor trustee specified in the trust agreement may only commence the trust administration duties after the original trustee has died, or has formally resigned, or has been formally removed through the appropriate judicial process.

 

• The grantor may appoint themselves as trustee, which would allow the grantor to maintain control over the trust assets and trust administration duties during the grantor's lifetime, and then upon the grantor's death, the successor trustee would then take over the trust administration responsibilities pursuant to the instructions in the trust agreement.

 

• Trust administration duties (outlined for New York trusts in the administrators, executors, preliminary executors, administrators d.b.n., administrators c.t.a.d.b.n., administrators c.t.a., ancillary executors, ancillary administrators, ancillary administrators c.t.a and trustees of express trusts, including a corporate as well as a natural person acting as fiduciary, and a successor or substitute fiduciary, whether designated in a trust instrument or otherwise.will vary depending on the type of trust, the size of the trust principal, the type of beneficiaries, and the type of assets contained in the trust principal, and may include distributing trust assets to the beneficiaries on some particular schedule specified in the trust agreement or distributing trust assets to third-parties on behalf of the beneficiaries, ensuring that the trust principal is preserved, filing trust tax returns and then paying any tax owed from the trust principal), investing trust property (under the prudent investor standard of the New York Consolidated Laws, Estates, Powers & Trusts – EPT, Section 11-2.3, entitled the "Prudent Investor Act", whether invested by the trustee directly, or as delegated by the trustee to some investment expert individual or firm), paying trust debts, and providing beneficiaries with a complete and transparent accounting of the management of trust assets on a regular basis.

 

• Experience drafting, negotiating and reviewing many types of trust agreements and related documents.

 

• The importance of specifying a successor trustee is emphasized by Section 7-2.3(a) of the New York Estates, Powers & Trusts Law – (EPT), entitled "Duties and rights of successor trustees", which indicates that if the trust agreement does not specify a successor trustee, then upon the death of the original trustee, and in the absence of any further direction in the trust agreement, if the trust has not been executed, the entire trust estate vests in either the New York Supreme Court or in the New York Surrogate's Court, and such Court in which the trust estate has vested then has the right to appoint any successor trustee such Court may deem appropriate to serve until the trust has been executed, under the same terms and conditions specified in the trust agreement for the original trustee.

 

• Trusts that were originally designed to provide certain tax benefits but for whatever reason fail to provide such benefits can be "reformed" (modified) upon approval by the appropriate court or by approval of the Internal Revenue Service (IRS) or both, after presenting the specific modifications proposed to reform the trust.

 

• Experience with drafting, negotiating, reviewing and presenting reformation amendments to trusts, in collaboration with tax and reformation subject matter experts (SMEs).

 

• Under the New York net trust income using a unitrust amount (4% of the net fair market value of the trust principal in the first year and then adjusted thereafter) rather than the standard amount provided under the Uniform Principal and Income Act (as adopted in New York in Article 11-A), if the Trustee (on its own discretion or with the consent of all trust beneficiaries) elects to have the unitrust provisions apply to the trust, pursuant to EPT Section 11-2.4(e)(1)(B)(I), which may have favorable income and tax ramifications for the trust.

 

Last updated 201008_1847