The terms estate administration and trust administration are not synonymous.

Laws govern countries and nearly every aspect of their citizens' lives.

These laws provide structure in a variety of areas, from what constitutes a crime to how property is owned and inherited.

In the United States, federal and state laws govern all estate planning.

Two common means of property inheritance are through probate or through a trust.

It is essential to understand the differences in terms of responsibilities, costs, and potential delays.

Trust and estate administration are similar but different.

What Is Estate Administration?

Estate administration describes the process by which a probate court supervises a decedent's estate from death until the distribution of the inheritance.

If the decedent created a last will and testament, the court must first validate the document and appoint the executor to follow the distribution instructions outlined in the last will.

If the deceased died without a last will, then the estate will be considered intestate.

When this happens, the state intestacy laws administer the estate.

What is generally involved in estate administration with or without a will?

Estate administration typically requires an administrator (if intestate) or an executor (if estate) to inventory and collect all assets, notify creditors, pay debts, file tax returns, and distribute remaining property to the heirs.

Probate can be a long and public process because it involves the local courts.

Depending on the state laws, the clarity of the last will (or lack thereof), and the complexity of the estate and family dynamics, probate can last from a few months to more than a year.

All costs associated with probate, such as attorney's fees and filing fees, will reduce the value of the estate.

Yikes!

What Is Trust Administration?

Trust administration applies only to estates where a trust is created and funded before or upon the death of the trustmaker.

After the death of the grantor or original trustee, the successor trustee will assume responsibility for managing and distributing trust assets in accordance with the trust terms.

Because trusts do not require court oversight, trust administration is far more private than probate.

What does trust administration generally involve?

In a trust administration, the trustee must notify creditors and beneficiaries, manage trust expenses and investments, file tax returns for the trust, and distribute assets in accordance with the trust's terms.

Trust administration is typically faster and more efficient than estate administration through probate.

Although the court does not oversee the administration of a trust, trustees have a fiduciary responsibility to act in the best interests of the beneficiaries.

Key Differences Between the Two

The main distinctions between trust administration and estate administration are costs, efficiency, and privacy.

Court Involvement: Administering a trust does not require court involvement, while estate administration does need probate court supervision.

Timeline: Trust administration is generally quicker because it avoids probate.

Privacy: Because court involvement is a part of the public record, estate administration does not afford privacy.

Costs: Trusts may cost more to set up than a last will, but they can reduce legal and court costs after the trustmaker dies.

Trustees may also need to hire accountants or attorneys.

These can make trust administration more costly.

When Both May Apply

Some individuals and families may find both estate and trust administration necessary.

When someone creates a trust but neglects to fund it with all their assets, remaining assets may still require probate.

Similarly, even trusts can be brought to court through disputes by beneficiaries.

Why Legal Guidance Matters

Trust and estate administration both have critical legal duties and requirements for trustees and executors.

When trustees or executors mismanage their responsibilities, they may face liability from creditors or beneficiaries.

Experienced estate planning attorneys can help prepare legal instruments to reduce the need for probate, ensure trusts are properly funded, and guide administrators in their roles.

If you need support in creating or reviewing your estate plan, request a consultation with Harvest Law KC.

While we provide no estate or trust administration services (in fact, not all "estate planning attorneys" do), we can refer you to attorneys who make such services a practice focus.

What are Key Estate and Trust Administration Takeaways?

Estate administration requires probate court supervision, while administering a trust does not.

Trusts may be more expensive to set up, but they can provide valuable savings in time and money on probate proceedings and fees.

Estate planning mistakes are common without the support of an experienced estate planning attorney.

Working with an experienced estate planning attorney is vital to getting your affairs in order.

This post is for informational purposes only and does not provide legal advice. You should consult an attorney for advice on any specific issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.

Reference: Justia (October 2024) "Trust Administration Law"