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Basics of Administering a Living Trust in Utah

Administering an estate with a living trust can be an overwhelming task, not to mention the potential for personal liability that can arise. This article aims to ease the burden of successor trustees by providing a basic overview of the general requirements of administering an estate with a living trust in Utah.

1. RECORDS AND REPORTS
At the outset, the importance of keeping all records and documenting all activities during the course of the administration cannot be overstated. Keep track of all income received, expenses paid, transfers, distributions, etc., involving the assets of the estate. Under Utah law, trust beneficiaries are entitled to receive information relating to the trust assets after the trust becomes irrevocable upon the trust maker's death or incapacity. Although the law does not require any particular format, it is best to organize it into an easy-to-understand spreadsheet that identifies each asset and shows what has come in and gone out since date of death.

Unless the beneficiaries waive their right to receive a report, it is good practice to share it with them before making any distributions to ensure there are no potential concerns that need to be resolved beforehand. Ideally, this report is accompanied by a proposal for distribution that outlines who gets what and asks the beneficiaries to give their approval of the proposed distribution and sign a document releasing the trustee of liability before proceeding. Beneficiaries cannot be required to sign a release of liability, but if they don’t sign the release, a trustee can reasonably postpone making a distribution until they are confident that there are no unresolved issues which might affect the amounts distributed.

Helpful Tip: Trustees can simplify record keeping efforts by opening a new checking account in the name of the trust into which liquidated trust funds can be deposited and then used to pay expenses. That way, the bank statements keep track of everything coming in and going out. Consult with a tax advisor or attorney about obtaining a new tax identification number for opening a new account.

2. SAFEGUARDING PROPERTY
Take whatever steps are necessary to ensure that all property of the trust is protected from theft, loss or damage of any form. Stories of family members taking things that mom or dad promised to them before anyone else has a chance to claim anything are common. It is important to move quickly to protect trust assets immediately after the death occurs and to monitor assets throughout the administration.

Helpful Tip: Review the estate planning documents to see if there is a signed document describing whether certain items of personal property are to go to a specific person. This is called a Personal Property Memorandum. If there is a Personal Property Memorandum with written additions, attempt to locate the items and keep them apart from other undesignated items until they can be delivered or picked up by the beneficiary.

3. COMMUNICATION
Make sure the beneficiaries know how to contact you if they have questions or requests. Let the beneficiaries know they can request copies of portions of the trust that relate to their interests and keep them informed about actions taken that may impact their interests. If there is any concern that an action may cause problems, then it is best to communicate with the beneficiaries and receive their consent before taking that action. If you plan to receive compensation for your time as trustee, notify the beneficiaries of the amount and rate of trustee compensation. Keep a written log of your time even if your compensation is based on a flat percentage rather than an hourly rate.

Helpful Tip: It is good practice to communicate in writing where it is reasonable, so that there is a record of everything. There are practical exceptions, of course, but you should try to document all communications.

4. FOLLOW THE TERMS OF THE TRUST
Carefully review the trust to make sure you understand the duties and powers of the trustee described in the document, who the beneficiaries are, who gets what, how and when they get it, and whether trust requires the creation of any sub-trusts. Carefully follow the terms of the trust to keep yourself safe from personal liability. If there is any reason to depart from the terms of the trust, ensure that it does not cause any problems with a beneficiary and that it does not trigger undesirable tax or legal consequences.

Helpful Tip: If you depart from the trust terms, it is important to consult with an attorney experienced in trust administration and consider getting consent from the beneficiaries affected by the departure.

5. IDENTIFY THE PROPERTY 
Make an inventory listing all titled assets of the trust, including the date of death value, how each asset is titled, and whether there were any joint owners or beneficiary designations. It is generally wise to get an appraisal for all real property. Consider having the mail forwarded to your address if you cannot go pick it up in person, which is helpful to identify accounts and bills that may not be ascertainable by reviewing the bank statements. Make a separate inventory for items of personal property that are of meaningful economic or sentimental value, i.e., items that might cause disputes among beneficiaries. Keep track of who receives each item.

If there are assets that are not owned by the trust which do not have a joint owner or beneficiary designation, make note of the asset’s value. Add up the value of all assets that fall into this category (other than personal property items with no title or account associated with their ownership). If the total value of assets in this category amounts to less than $100,000 and does not include real property, then you may be able to get control of them using an Affidavit without having to initiate a probate proceeding, in according with Utah Code §75-3-1201. This is commonly known as the “small estate procedure.” If the value adds up to more than $100,000 or real property is involved, then a probate proceeding may be required to get control of the asset.

Helpful Tip: Assets not owned by the trust which do not have a joint owner or beneficiary designation are controlled by the last will and testament, so it is important to review the will to verify whether it gives everything to the living trust or names different beneficiaries than the trust. If the asset is jointly owned or names a beneficiary, then the joint owner or beneficiary takes control of the asset without the need for trustee involvement or probate.

6. DISTRIBUTING THE ASSETS
As stated above, it is wise to resolve any disputes and send a report to the beneficiaries about the assets prior to making distributions. In addition, it is important to carefully review bank statements and financial records to make sure there are no outstanding debts to be paid or overpayments to be refunded before making distributions. It is also a good idea to communicate with the beneficiaries and verify whether they have any preferences regarding the method of distribution of the assets (in kind or in cash).

Assuming the trust directs personal property to be distributed under the terms of the trust, in many cases it is easiest to simply communicate with all of the family members and allow everyone an equal opportunity to see the property and make requests, then attempt to divide everything up in a way that does not cause disputes. If disputes are likely, the best route is often to hire an estate sale specialist and sell the property, then add the proceeds to the trust account to be distributed in cash. Again, the key is to communicate openly with the beneficiaries.

Lastly, it is good practice to hold back a certain amount to make sure there is enough to pay whatever final taxes may be owed and pay the tax adviser for preparing the returns. Typically, a safe amount to hold back is 20% of the total assets, but this will vary from one case to another. The amount held back is heavily dependent on the confidence level of the trustee regarding what remaining debts there are and how much may be owed in taxes. It is always a good idea to talk with a tax adviser about preparing the final individual and fiduciary tax returns. After the final returns are filed and all remaining debts are paid, the remaining amount can be distributed to the beneficiaries.
There is no action needed to officially terminate the trust, other than distributing all of the assets and ensuring all tax returns are filed and accounts are closed.

Helpful Tip: If there are any assets that may be tax sensitive, such as an IRA or 401K, consult with a financial adviser or estate planning attorney before making any decisions as to the distribution of those assets. Also notify the beneficiaries of such assets and find out if they have a preference regarding the method of distribution. You should never give advice to the beneficiaries about how distributions may impact their personal tax situation. Instead, direct beneficiaries to consult with a tax professional if they have questions about taxes.

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Link to section of the Utah Trust Code regarding Trustee Duties and Powers

PLEASE NOTE: The information in this article is a highly simplified explanation of a standard administration of an estate involving a living trust. There are various factors that can impact whether any portion of the administration involves a number of additional requirements to avoid increasing the risk of liability or other issues.

If there is any question about whether an action is legally appropriate or financially advisable or otherwise potentially problematic, it is highly recommended to consult with an attorney that is experienced in the administration of living trusts in Utah. In most cases, the assets of the estate can be used to pay the attorney fees or you can be reimbursed from the estate if you use your own funds. Hiring an experienced attorney is usually money well spent to make sure everything is done correctly and there are no loose ends.

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Hadfield Law Firm | Preserving your legacy - Building your trust | Lehi, UT
5 out of 5 stars My husband and I went in to meet Matt after being recommended by another attorney. We went in not knowing much about estate planning. He taught us so much, he’s very patient and caring and willing to answer endless questions and to explain things we knew nothing about. Our experience with Matt made us feel prepared and reassured that he will continue to be there for us when we need help. We also felt our purchase was a great deal and he offered different payment options. And again he could have tried to upsell us and get us to spend more money for “important” reasons and never tried that once. I would absolutely hire Matt again and I’m so grateful we met him and got to achieve our goals with an honest and helpful person.
Hadfield Law Firm | Preserving your legacy - Building your trust | Lehi, UT
5 out of 5 stars Professional in every way!
Hadfield Law Firm | Preserving your legacy - Building your trust | Lehi, UT
5 out of 5 stars I worked with Matt in 2015 to help me understand and administer my father’s trust. I needed reliable and honest expertise in Arizona since I reside in a neighboring state. Matt’s experience and guidance was instrumental in helping me understand and execute the trust. He assisted me every step of the way, explaining and re-explaining (when necessary), administering paperwork, and providing references to contractors and service providers so that I could complete tasks quickly. I am grateful for his counsel during my time of need. I would fully recommend Matt and his team for anyone needing estate or trust assistance.
Hadfield Law Firm | Preserving your legacy - Building your trust | Lehi, UT
5 out of 5 stars Creating a Living Trust is a difficult task and can be very challenging. I had the pleasure of working with Matt who not only took the time to explain everything, but also explained various options in an effort to accomplish what I needed. He is a great communicator, explains things well, and listens to your needs. He's very professional with a warm personality, maintains his commitments and is very knowledgeable in his field. His honesty and desire to assist provided me comfort and made me feel very satisfied with the overall outcome. I highly recommend Matt for any estate planning you might be considering. His qualifications and performance are truly excellent.