What Happens to a Trust After the Last Trustor Passes Away? Written By: Rilus M. Dana, J.D.Managing PartnerDana and Associates, LLC Posted On: 3/7/19 Modified On: 8/4/19Filed Under: Estate Planning, TrustsTagged With: questions, trust administration, trusts Original URL: https://www.danalegalhelp.com/what-happens-to-a-trust-after-the-last-trustor-passes-away/We are often asked: “What needs to be done after I pass away, and is this something my children can do themselves? Do they need to hire a lawyer after I am gone?” In this article, I will discuss the responsibilities of a successor trustee in a trust to help answer these questions.After the loss of a loved one, I meet with families in a free Family Administration Session. In this meeting, we determine if there is a trust that needs to be administered and what needs to be done.What Needs to be Done?While the administration of every trust is unique, the process generally breaks down into fiduciary services and legal services. The trustee is responsible for following the law and to uphold the fiduciary duty owed to the beneficiaries of the trust. The trustee has a number of responsibilities while administering the trust, such as obtaining a tax ID number and providing proper notice to beneficiaries according to the Arizona Trust Code. In administering the trust, the trustee can do it alone, the trustee can hire an attorney, or a third-party company can administer the trust.Should the Trustee Do it Themselves?The administration of an estate is like a car repair. When you have an issue with your car, you may be tempted to search the internet to see if you can diagnose and fix the problem yourself. A DIY repair might even seem like a success until you discover the brakes are not working and you are heading down a steep hill and the car is full of all the people you care about the most. This scenario may seem extreme, but it is a good analogy for DIY trust administration. Trustees often think they have done a great job until they are served with a lawsuit and suddenly realize they made a mistake and their own personal assets may be at risk because of their mistake.Administering a trust comes with tremendous responsibility and liability. It might seem easy through a quick internet search, but often problems go unnoticed until things have gone horribly wrong. Often clients come to me halfway through the trust administration process with pending beneficiary lawsuits, creditors breathing down their necks and/or excessive and unexpected gift taxes.Should the Trustee Hire an Attorney?When I am having issues with my car, I hire a mechanic because I want to have peace of mind after the repair is complete and I am driving with my family in the car. What is easy for my mechanic, because she has the knowledge, time, tools, and resources to complete the repair is not necessarily easy for me.The same can be said for hiring an attorney to assist with a trust administration. A trustee is obligated to follow the laws of the Arizona Trust Code, which is complicated. When administering an estate, a trustee can hire a lawyer to help with fiduciary responsibilities and ensure the trustee is compliant with the law. A lawyer can also ensure that the beneficiaries are properly notified in accordance with the Arizona Trust code and taxes related to the estate are filed properly. Hiring an attorney helps insulate the trustee from the potential pitfalls and legal liabilities associated with trust administration.What if a Third-Party Fiduciary Company Serves as Trustee?When my car is broken down and I don’t have time to drop it off at the mechanic because I am running late to work, I call a ride-share like Uber or Lyft. If your trustee is unwilling or unable to administer the estate, they can resign their role as trustee and hire a third-party such as a bank, investment company, or law firm, to take over.When considering your choices for professional trustees and comparing prices it is important to distinguish between “estate settlement” services and “trustee” services. Estate settlement is the process after the death of the last trustor of collecting all of the assets and distributing them to the beneficiaries. Trustee services is the process of serving as the trustee after the trust has already been set up. Sometimes this is done for the trustor if he or she can no longer manage the assets themselves. Trustee services are also necessary when assets are to be held for a beneficiary until they reach a certain age.These companies are also entitled to reasonable compensation and often charge a percentage of the total value of the trust or estate to compensate for the time and assume liability it takes to administer.The fee for trustee services is much less than the fee for “estate settlement”, your bank may have a different name for these levels of services. It is important to understand the difference and what exactly is covered by their fees. I have seen many families surprised by the amount charged by a professional trustee because they thought the fee was only the “trustee” services fee and didn’t understand the difference.What This Means for YouAfter the last trustor passes away a trust must be administered either a trustee, by an attorney, or a third-party company. While each option has its unique set of benefits and drawbacks, it is important to consider these options while you are setting up your trust. Make sure you choose a trustee who is knowledgeable and willing to assume the time commitment and liability associated with the administration of your trust.If you need help with the administration of your trust, contact us now to schedule a free Family Administration Session so that you can rest assured knowing that your assets will be handled exactly the way you want them to be.Play VideoHow to Avoid Probate with a TrustThis video describes the legal process of probate and how it can be avoided with a trust.