An administrative trust is one that is created after someone’s death as a temporary legal vehicle. The trust allows someone to manage estate assets and pay off final expenses before assets are distributed to beneficiaries and heirs. Keep reading to find out more about when an administrative trust might be used and get answers to other common questions about trust administration.

What Happens During an Administrative Trust?

An administrative trust occurs when a person dies and the estate they leave behind must be administered. If assets are not already in trusts with specific provisions for how they are to pass on to beneficiaries, a period of administration occurs where the assets are marshaled (collected) and debts and taxes are paid as appropriate.

During this time, the administrator of the trust or the executor of the estate must take a number of actions. First, they obtain a tax-payer identification number for the estate. They inventory the assets and expenses of the estate and pay any bills and other obligations. They file a tax return and pay any necessary income and estate taxes that might be relevant. Once that is all done, the trust administrator (or trustee) then distributes the remaining assets to beneficiaries as required by probate law and the provisions of the deceased individual’s estate plan.

How Does an Administrative Trust Work With Estate Plans?

The administrative trust is not meant to take the place of estate plans or act as an actual trust to protect the interests of you or your heirs. It is simply a practical waypoint for assets in the estate administration process.

For example, say a widower has three adult children. He means for all of his assets to be divided equally among these children when he passed away. To facilitate this, he sets up three trusts and creates a will that indicates his assets should be divided equally and used to fund these trusts when he dies.

When the man passes away, his assets are not in those trusts. There is a period of time following death when the assets must be researched and collected. Before they can be divided among the heirs, though, the estate must be settled. During this time of estate administration, a temporary administrative trust is understood to be created. The trustee or executor gathers the assets and satisfies debts. Once all the necessary accounting and tax tasks are handled, the assets are divided and used to fund the trusts for each of the three children. The administrative trust then ceases to exist.

Who Manages an Administrative Trust?

You can appoint an executor of your estate in your will. This person would typically be the de facto administrator or trustee of the administrative trust. They are automatically considered to be a fiduciary of the administrative trust, which means they are required by law to make decisions that protect the interests of your heirs and beneficiaries.

What Happens if You Don’t Name an Executor?

If you don’t name an executor for your estate, the court will choose someone. Typically, a person who is interested in the position, such as a family member or close friend, can petition the court to be named as the administrator. However, if no one comes forward to ask for this responsibility, the court may ask someone close to the family to serve in this capacity. The person always has the right to refuse this request. In cases where no one can be found to handle the estate, the court may ask a third-party to do so.

Ultimately, if you want to protect your wishes and ensure the interests of your heirs are cared for by someone you trust, you should take time to create a will that appoints an executor. This also lets you make your wishes about how your assets should be distributed known in writing, which can positively impact the outcome of estate administration in the future.

What Is Trust Litigation?

Whether you have created a trust to help support your heirs or an administrative trust is automatically created to handle your assets immediately upon your death, your beneficiaries have a variety of rights. They can protect those rights via trust litigation if they feel a trustee is not managing assets correctly or is infringing upon their beneficiary rights.

When Can an Estate Planning and Trust Lawyer Help?

An experienced estate planning attorney can help plan for the future and protect your assets to ensure your beneficiaries and heirs are taken care of. One way to do this is to create trusts before you pass away. These types of trusts are different from the temporary administrative trust that occurs when you pass away and the estate executor needs to manage assets.

Creating and funding trusts while you are alive can help you pass assets on to your loved ones without going through many of the processes described above. That’s because you don’t own the assets you put into a trust—the trust owns them. While the IRS governs whether trusts are taxable, most trusts do provide some protection against taxes, creditors, and other threats to your assets.

A trust attorney can help you understand all your options and what you can (and can’t) do with trusts. To find out more about how we can help you protect your assets for the future, contact Barilari & Williams, LLP, today.