TRUST ADMINISTRATION

A revocable or living trust is a common estate planning vehicle. During the life of the person setting up the trust, they are usually the trustee and the administration of the trust is relatively simple, no extra tax returns or reporting requirements. Upon the incapacity or death of the trust maker, a successor trustee will step in and have requirements and responsibilities that he or she needs to understand.

If you are a successor trustee, you need to be aware of the rules of trust administration. The trust document itself will be your roadmap, but trust administration requires knowledge of income and estate tax rules and the laws of the State of Ohio regarding trusts. As trustee you are a fiduciary with duties that if not carried out correctly can result in liability to you and potential financial loss. Having an attorney guide you through the process will allow you to minimize risk to you with regard to your fiduciary liability.

Some of the duties of a trustee are listed on this page, but every trust is different and it is best to consult an attorney to make sure that you are administering the trust correctly.

Notify Beneficiaries

Ohio law requires Trustees to notify beneficiaries that certain events have occurred such as the death of the trust creator if the trust becomes irrevocable.

Apply for a new Taxpayer Identification Number

If all or part of the trust has become irrevocable upon death, it will be necessary to get a new Taxpayer Identification Number for the trust from the Internal Revenue Service.

Trust Investment

The Trustee has a duty to make sure that the investments held in the trust are appropriate for the income and growth objectives of the trust, which will depend on the projected future needs of the trust and the trust beneficiaries.

Trust assets should be kept separate from the trustees own assets in accounts in the name of the trust and with the trust taxpayer identification number assigned to the account.

File income tax returns

In addition, if the trust has income it will probably be necessary to file federal and state income tax returns. If all of the trust income has been distributed to beneficiaries, then they are responsible for including this income on their own individual income tax returns. However, Form 1041 must still be filed annually until all trust assets are distributed. We generally suggest that Trustees hire an experienced accountant to prepare these complicated returns.

File federal estate tax

The Trustee may need or if there is surviving spouse may want to file a federal estate taxes, This return is complicated and should be prepared by an attorney or accountant

Records

Under Ohio law, Trustees are required to provide beneficiaries with an annual account of all transactions in the trust and the trust assets. This account is due on January 31 of each year. You should keep good records of all transactions in the trust so that this account can be prepared. Records should include copies of all statements, any checks that are written and records of items distributed. This requirement is often missed by trustees and can lead to fiduciary liability.

Need Help?

We are here to help with all the legal, accounting and tax issues and to make this process as easy as possible for you. If in doubt, please contact our office.