How to Administer a Trust After Death in New York

The administration of a trust after the grantor's death varies depending on the type of trust. Testamentary trusts, which are created within a last will and testament, only become effective once the will has gone through the probate process. Revocable trusts are managed according to the trust's terms, and in most cases, they are terminated upon the grantor's death, with the trust property being promptly distributed to the beneficiaries. However, some revocable trusts may persist beyond the grantor's death, particularly when there are minor or disabled children involved. In such situations, the trust terms typically instruct the trustee to oversee the trust fund for the benefit of the minor or disabled child. Irrevocable trusts that do not grant life estates or powers of appointment to the grantor and are not included in the grantor's taxable estate are generally administered separately from the grantor and remain unaffected by their death. These irrevocable trusts possess their own tax identification numbers (EIN) and report their income separately from the grantor.

How to Close a Trust After Death

For trusts that come to an end upon the grantor's death, the following process is typically followed to ensure proper administration:

1. The successor trustee's first responsibility is to secure a copy of the trust document, along with any amendments and pertinent documents such as deeds, titles, or insurance policies registered under the trust's name. If these documents are not already in the successor trustee's possession, they must be promptly located. Having access to these essential documents will enable the successor trustee to comprehend the trust's administration requirements and identify the properties held within the trust.
2. After securing the trust document, the successor trustee is obligated to notify the beneficiaries in writing about the grantor's passing and the trust's existence. Furthermore, the trustee must provide the beneficiaries with a copy of the trust, ensuring they are fully aware of their rights and responsibilities as outlined in the document.
3. The successor trustee is responsible for conducting a comprehensive inventory of the trust's assets and ensuring that all trust properties are properly transferred to their name. To facilitate this process, the successor trustee must submit essential documents to the relevant institutions, such as banks or county recorders. These documents include a certified copy of the grantor's death certificate, the pertinent trust document page that designates the successor trustee, and an affidavit from the successor trustee. Before the trust properties can be transferred, the successor trustee must obtain a tax identification number (EIN) and establish a bank account under the trust's name.
4. After the trust assets have been successfully transferred to the successor trustee, it is crucial to establish the value of these assets as of the date of the grantor's death. To avoid potential conflicts or disputes between the beneficiaries and the trustee, it is highly recommended that an independent, professional appraiser be engaged to assess the value of the trust's holdings. This impartial valuation can help prevent beneficiaries from questioning the accuracy or fairness of the appraisal, which might otherwise be seen as a conflict of interest if the successor trustee were to conduct the appraisal personally.
5. The successor trustee is responsible for the prudent management of trust assets during the creditor claim process. Revocable trust properties remain part of the grantor's gross estate and may be subject to the grantor's debts if the probate estate lacks sufficient funds. Premature distributions to beneficiaries by the successor trustee can lead to personal liability if a valid creditor claim emerges and the beneficiaries fail to return the distributed funds to satisfy the grantor's outstanding obligations.
6. Before proceeding with the distribution of trust assets, the successor trustee is obligated to furnish the beneficiaries with a comprehensive accounting of the trust's financial activities. Upon receiving the beneficiaries' approval of the accounting, the successor trustee can confidently distribute the assets without the risk of personal liability. To ensure proper documentation and protection, the successor trustee must secure signed receipt and release forms from each beneficiary, approving the accounting and acknowledging their acceptance of the distributed assets. Once all trust property has been fully distributed to the beneficiaries, the trust administration process is considered complete, and the trust is effectively terminated.

Navigating the intricate landscape of trust administration can prove challenging, given the stringent adherence to legal mandates and the ever-present possibility of discord among beneficiaries. Enlisting the guidance of a seasoned trust and estate attorney ensures that your actions remain steadfastly within the confines of the law, shielding you from the specter of personal liability. Should you need assistance in the trust interpretation or adminsitration process, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].