Being named Trustee of an estate places many legal and fiduciary responsibilities on that person. A Trustee must wrap up the decedent’s affairs, arrange for the payment of any income and estate taxes, and distribute the assets of the estate. Unfortunately, we have seen Trustees make mistakes during the process of carrying out these responsibilities that expose the estate to litigation, increased tax liability and other potentially serious consequences.
To avoid these issues with estates, here are three significant reasons for a Trustee to consult with a professional during estate administration or have a high-quality professional act as the Trustee:
- Filing the proper forms to protect the estate: Estate administration can be complicated and requires familiarity with the process, applicable statutes, and tax forms. For example, the “portability election” allows a surviving spouse to make use of both his or her individual federal estate tax exemption and the exemption granted to a first-to-die spouse. However, the Trustee of the estate must timely file an estate tax return, Form 706, in order to use the portability election. If not, the deceased spouse’s exemption is lost.
- Protecting the Trustee: There are many actions Trustees make that puts them at personal risk. For example, Trustees are responsible for making distributions to beneficiaries. However, the Trustee becomes personally liable for any improper distributions made before taxes and other creditors are paid. To avoid these “at risk distributions,” a professional can assist the Trustee by first ensuring all required debts are paid before beneficiaries receive their share of an estate.
- Protecting the estate’s value: A Trustee has a fiduciary duty to manage the estate’s assets, such as stock portfolio, and protect its financial health. Estates will sometimes have a stock portfolio or homes as part of the assets. If the Trustee does not properly protect these assets’ value, he or she could be in breach of the fiduciary duty. Consulting with a professional will allow the Trustee to properly act, and react (if necessary), to market conditions.
When you are serving as a Trustee, a high-caliber professional will counsel you and your family throughout the entire process. Having access to trustworthy client service will ensure the estate administration, from making distributions to filing the proper forms, is a smooth and stress-free process.
