4 Tips for Smooth Trust Asset Allocation and Distribution

Trust administration in Sonoma County is a complex process involving numerous tasks. Trustees should consider the needs and expectations of beneficiaries when making important decisions regarding the management of trust assets.

If you manage a trust, you may be under intense pressure to distribute the trust assets swiftly. You should, however, avoid jumping the gun and make sure all trust administration tasks are carried out in the proper sequence.

Follow these tips to simplify the trust asset allocation and distribution process.

Pay the Decedent’s Debt

Before distributing assets among the beneficiaries, determine and pay the debts of the testator. If given proper notice, creditors have a certain amount of time to file their claims in probate court. Typically, any claims are settled using the estate assets first, and then using the assets contained within the revocable living trust. Instead of waiting for creditors to come forward, trustees should take a proactive approach which involves actively finding creditors, giving them the appropriate notice, and addressing their claims.

Pay any Back Taxes

Even in cases where the decedent had no income, the trustee has the option to file a tax return. This allows them to claim any refunds that might be owed to the deceased, such as those stemming from taxes withheld, estimated taxes already paid, or other credits. As a fiduciary, the trustee is usually responsible for filing a fiduciary income tax return for both the estate and the trust. Trustees should also file state inheritance tax returns, final or late gift tax returns and state or federal estate tax returns.

Communicate With Beneficiaries

Trustees should communicate regularly and properly with beneficiaries to ensure smooth trust administration in Sonoma County and hassle-free asset distribution. Trustees are responsible for keeping beneficiaries updated on major developments and sharing important trust accounting reports with them at regular intervals.

A receipt, release, and refunding agreement can be used to increase transparency and minimize the potential liability of the fiduciary when making final distributions.

Once the trustee makes sure that all debts and taxes are settled, beneficiaries have been notified, and the trust is fully funded (including the transfer of all appropriate probate and other assets to the trust), they can keep aside a certain amount to cover any remaining expenses.

Allocate Trust Assets

When distributing trust assets, consider the methods used to value them. Separate assets belonging to a surviving spouse (in cases where there is a joint trust) and divide the deceased’s assets in accordance with obligatory funding formulas. Consider estate and generation-skipping transfer taxes, along with any remaining exemptions.

Funds can be moved into beneficiaries’ accounts through wire transfer or checks, and property may be allocated via a transfer of deed or a change in title. Once the distribution process is completed, the trustee may inform the IRS that the fiduciary relationship has been terminated.

Whether you want to create a trust or are a trustee and need help managing a trust, Johnston & Associates has got you covered. Our trust attorneys have years of experience helping individuals setting up simple and complicated trusts to meet their unique needs. To learn more, call (707) 545- 6542.