When someone dies with assets in their revocable living trust, the successor trustee will need some type of legal help to settle the trust. There are some basic legal aspects to consider as well as more advanced issues as well.
First, the successor trustee is a fiduciary under Florida law. A fiduciary is one of the most important jobs in the legal world, being held to the highest standard of truth and fairness to the trust beneficiaries. The successor trustee has the following duties (among others) under Florida law:
- Duty to account to beneficiaries
- Duty of impartiality
- Duty of fairness
- Duty to administer the trust
- Duty of prudent administration
Most people who have taken on the duty as trustee have never served in this role and are highly unlikely to know what to do to properly administer the trust and estate, pay the decedent's bills and taxes, and more.
Basic Duties of the Trustee
Florida and federal law provides that the successor trustee of the trust must do the following:
- File a Notice of Trust with the probate court
- Deposit original last will and testament (if in possession) with the probate court
- Get an EIN for tax issues with trust assets
- Inform trust beneficiaries of trust (i.e., share copy of trust with appropriate trust beneficiaries)
All of these actions are typically done with an estate planning/probate attorney.
Advanced Duties of the Trustee
The above basic duties are fairly simple under most circumstances. The advanced role of the trustee are far more complex. Here, the trustee has the duty to:
- Administer the trust fairly for all beneficiaries
- Invest the trust assets correctly and as a reasonably prudent person would
- Account to trust beneficiaries in accordance with Florida Statutes
- Administer the trust in a timely manner
- Make sure the decedent's bills and taxes are taken care of
- Pay any tax bills for the trust itself
The advanced duties are where a successor trustee would likely want to hire an attorney to help settle the decedent's living trust.
Why and When does an an Attorney Help Settle a Trust?
The above duties are many and the potential for missteps and misunderstandings among beneficiaries are many. Let's be realistic - upon the death of a loved one, family issues may confront themselves. Old sores about money, trust, care issues, family jealousy, monetary pressures and more may open very quickly. When a family starts to argue about money and old issues, the successor trustee will likely want legal help in settling the estate. Hiring an attorney at this point will:
- Help the trustee properly account for the decedent's assets and trust administration
- Release the trustee from all liability as serving as trustee
- Determine the trustee's appropriate fee for their work
- Determine tax issues for the trust and the decedent
- Help determine when and how to liquidate trust assets
If the trustee does not perform his or her duties correctly, the family will likely hire their own attorney. Monies can be improperly distributed, lawsuits can be filed and more. The trustee can be personally responsible for outstanding bills and taxes! Here, a good attorney will help make sure everything goes smoothly, the bills are correctly paid, the taxes are taken care of, the trustee takes a trustee's fee (if they so desire) and the trustee is released of their duty correctly so that trust beneficiaries cannot come back and sue the trustee.
Releasing the Trustee
This last part is the most important aspect of hiring an attorney to help settle the trust. If the trustee is not properly released from the trust beneficiaries, the beneficiaries have up to 4 years to sue the trustee (and maybe more) for improperly administering the trust. Here is a typical example of how things can go wrong:
Mom dies with all of her assets in her living trust. She has 4 children, all equal beneficiaries, with one son as the successor trustee. The trust assets are $500,000. The children do not get along and think the one son is improperly administering the trust, among other family issues. The siblings demand money from the son as soon as possible. If the son makes full distribution of trust assets to the siblings without properly paying the bills, providing an accounting and getting a release, the siblings now have their money and can sue the trustee. The trustee has made distribution of the trust but must now defend himself with his own money. The trustee did not follow the correct procedures under Florida law and did not get a full release from the beneficiaries.
Here, if the successor trustee had hired an attorney to do all of the work and get the trustee released, the son could take a reasonable fee and also be released from his duties so his siblings cannot now sue him.
Attorney's Fees in Trust Settlement
The only drawback to having an attorney help settle the trust is that an attorney takes a fee to do so. The fee in Florida is typically 2.25% of the trust assets for the first $1 million. Trustees are not required to have an attorney, but most trustees are not familiar with the appropriate rules, duties, etc. It is always best for the trustee to consult with an attorney in administering a trust due to the many legal duties, especially when considering the following:
- Trust size and complexity - the larger the trust, the more likely you would want an attorney to help settle the trust
- The number of beneficiaries - the more beneficiaries, the more likely a disagreement that can create further legal problems
- Outstanding bills of the decedent - the successor trustee will want to make sure outstanding bills and taxes are paid, which will likely include needing and attorney
- Difficult beneficiaries - let's face it - if the decedent's family does not get along, the successor trustee will want legal representation
- Trustee's fee - if the successor trustee wants to take a fee for his or her work, an attorney would typically help document the fee, get releases, etc.
- You do not know what you do not know - most people have never settled a trust so an attorney's help can be enormous.
If you want to learn more:
- Visit our Trust Administration Page
- You may want to read our book, Navigating the Florida Probate Process