Someday you may have the responsibility of overseeing the assets of a loved one who has died. However, it is not always true that you will administer a last will and testament. Some people put their assets into a trust, which means you might become a trustee to take charge of the trust.
While a trust and an estate each pass on property to beneficiaries, each process has its own distinct set of responsibilities.
Estate administration in action
When someone passes away, their estate typically goes through probate. This involves validating the will of the deceased person and distributing assets to heirs. The executor, appointed in the will or by the court, oversees this process.
During estate administration, the executor identifies and values the assets of the decedent, pays outstanding debts and taxes, and distributes the remaining assets among the heirs according to the will or state laws. The probate court supervises this entire process.
Trust administration in operation
In contrast to estates, trusts operate outside the probate system and offer a more private method of asset distribution. The person creating the trust, known as the grantor, appoints a trustee to manage and distribute assets to beneficiaries as outlined in the trust document.
Trust administration typically involves less formal court oversight compared to estate administration. The trustee is responsible for identifying trust assets, settling debts and ensuring the distribution of assets according to the trust terms. The process is more streamlined and avoids the public nature of probate.
Key differences
The main distinction between trust and estate administration lies in the involvement of the probate court. Estate administration is a court-supervised process while trust administration operates privately without direct court oversight. Additionally, the timeline for estate administration can last longer due to legal requirements, whereas trust administration can be more flexible.
Estate administration may involve more paperwork and legal formalities, potentially causing delays. Trust administration, on the other hand, relies heavily on the efficiency of the trustee and adherence to the trust document. Executors should prepare for these distinctions and the responsibilities that come with each role.
Whether you administer an estate or a trust, understanding the unique aspects of each process should help you execute the duties of whatever position your loved one wants you to take.