Trust administration in Florida is the legal process in which a successor trustee of a living trust carries out the trust document’s instructions after the trustmaker’s death. A trustmaker of a living trust typically names themselves as the initial trustee, and they appoint another person, often a spouse or child, to act as successor trustee after the trustmaker’s death. A successor trustee of a living trust has a wide range of powers and responsibilities.
The successor trustee has a legal duty to the trust beneficiaries that includes proper administration of trust assets and the distribution of assets to the intended beneficiaries. The trustee can be liable for damages caused by incorrect handling of trust assets or improper trust administration.
The successor trustee should follow these initial steps to start a trust administration:
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Once they obtain the TIN for the trust, the successor trustee can consolidate financial accounts for distribution. The TIN also enables the trust to file a tax return. Trusts that have more than $600 in income for any tax year must file a federal tax return using the trust’s TIN.
In Florida, a notice of trust is the formal notice that a trustee provides to the public that the trustmaker has deceased. Upon the trustmaker’s death, Florida Statute 736.05055 requires that the successor trustee file a “notice of trust” with the court of the county of the trustmaker’s domicile. “Domicile” is where the decedent resided at the time of their death.
The statute requires certain information to be included in the Notice of Trust. The Notice of Trust must contain the trustmaker’s name, date of death, the title of the living trust, if any, the date of trust execution, and the successor trustee’s address. A Notice usually includes a statement that the trust is liable for expenses of probate administration and the decedent’s debts if the probate estate is insufficient to pay all debts.
The Notice of Trust is filed in the probate case if the decedent’s personal representative has initiated a probate proceeding. Absent an existing probate, the Clerk of Court will file and index the Notice.
The purpose of the Notice of Trust is to give public notice of the trust’s existence and the successor trustee’s contact information so that creditors are aware of assets available to pay creditor claims.
Trust administration involves handling assets titled in the name of the living trust. The successor trustee must find out what the trust owns. The trustee can gather the trustmaker’s recent bank statement, financial statements, and reports received by email or posted online to see what financial accounts are owned in the name of the living trust.
The trustee should examine the title of assets held in the decedent’s personal name individually or jointly with another person. The successor trustee may find assets held jointly with a surviving spouse or made payable on death to a child. Jointly titled marital assets will automatically be conveyed to the surviving spouse by operation of law. Pay-on-death assets are automatically transferred to the named beneficiary, often the trustmaker’s child. Assets owned in the decedent’s own name will be administered through probate. The heir of the probate usually will be the living trust because most living trust plans specify the “pour over” of the probate estate into the decedent’s living trust.
The successor trustee should check any safe deposit box or house safe owned by the decedent. The trustee needs a copy of the death certificate and a copy of our living trust, together with the safe deposit box key, to gain access to a safe deposit box at a bank.
A successor trustee should begin administration with an inventory of trust assets. A trust inventory includes a list of assets titled in the trust name and the market value of the assets at the date of death. An accurate value of trust assets affects future tax liability when the trust beneficiaries sell the assets. Trust beneficiaries can “step-up” in the basis ( the “tax cost”) of some living trust assets so that the beneficiaries will pay tax on value increase after the date of death rather than the decedent’s original purchase price.
If all or part of a living trust has become irrevocable after the death of a trustmaker, the successor trustee must obtain a federal Taxpayer Identification Number for that trust. Use IRS Form SS-4 to get this number. If the trust thereafter has taxable income, The trustee may have to file IRS Form 1041S income tax return if the trust has taxable income.
Estate tax reporting is not required for most living trusts. The estate tax form 706 form will need to be filed only if federal estate taxes are due. An accountant or tax attorney should prepare the 706 form because estate taxation is complicated.
It may be appropriate for a trust beneficiary to “disclaim” an interest in all or part of their share of trust property. A disclaimer treats the disclaiming beneficiary as pre-deceasing so that the disclaimed property will automatically pass to the next beneficiary in line. An estate planning or tax attorney can explain the benefits and the procedures for a proper disclaimer under Florida statutes.
Some trust agreements include powers of appointment that give the trust beneficiaries the right to change the allocation of their inherited trust property after the beneficiary’s own death. The appointment must be expressed in the beneficiary’s own will or living trust. An attorney can explain the benefits and procedures for exercising a power of appointment.
A trustee is obligated to keep trust beneficiaries reasonably informed of the progress of trust administration. Upon a beneficiary’s reasonable request, the successor trustee should provide the beneficiary a copy of the decedent’s trust agreement, including amendments, and provide a beneficiary with relevant information about trust assets.
Florida trust administration is hard work and time-consuming. Some trust agreements provide that successor trustees are entitled to reasonable compensation or fees for their role in trust administration. The amount of “reasonable compensation” depends upon the complexity of trust administration and the trustee’s professional expertise.
Florida Statutes provide that successor trustees are entitled to trust administration fees based upon a percentage of the value of trust assets and atypical legal issues, if any, that are part of trust administration. Florida trust administration fees earned by the successor trustee are 1% to 3% of the total trust assets. The statute provides higher fees for trust administration involving unusual legal and tax issues.
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