Trust Administration occurs after the death of the grantor and before distribution of trust assets to beneficiaries, or to beneficiaries' trusts. The law firm of NorthEast Estates and Trusts, PLLC (NEET) has experience in all aspects of estate planning, including administration of trusts in Vermont. If a loved one has recently died, it is important that you act within certain deadlines, particularly for some common trusts that use disclaimers or other time sensitive provisions. If you have questions about administering a trust in Vermont, or wish to schedule a free initial consultation to discuss hiring NEET to assist you with a trust administration, please call Adam Bartsch, Esq., at 802-985-8811.
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Below is an overview of the trust administration process in Vermont, links to helpful blog topics addressing trust administration issues, and answers to frequently asked questions about trust administration in Vermont.
Trust Administration in Vermont
Trust Administration has the same three principal goals as probate administration: making an inventory of the decedent’s assets, paying debts and taxes, and distributing the assets to the beneficiaries listed in the trust agreement.
However, trust administration does not include the involvement of the probate court. This has positive and negative ramifications. On the positive side, the successor trustee may act more quickly than a probate court would to conclude the post-death phase so that the beneficiaries can receive their inheritance sooner. This might be particularly important where a family business needs to be handed over to new leaders or sold quickly while it still has value. Additionally, by excluding the probate court, family privacy is maintained because court documents do not need to be filed. On the other hand, because the probate courts are not overseeing the process, there is less structure and formality associated with administration of the decedent’s estate. This lack of oversight can allow mistakes to occur more frequently, and if allowed to go unseen for a lengthy time period, the financial repercussions may be greater.
If not competently handled, trust administration can be more complex than probate, in part because of a broad misconception that the involvement of professionals such as an attorney and a certified public accountant are unnecessary for the administration of trusts. Rather, trust administration includes numerous important steps, including the following:
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Reviewing the trust document for general dispositive provisions, powers of appointment, disclaimers, allocation provisions, trustee power clauses, tax clauses, and other important trust provisions;
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Collecting asset and liability information, including assets in the trust, assets subject to probate, and assets that pass by operation of law;
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Reporting and accounting to trust beneficiaries as required by the trust and/or Vermont trust laws;
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Addressing estate tax issues, including filing of Vermont and federal tax returns; and
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Preparing for final distribution of assets, including establishing subtrusts as directed by the trust agreement, transferring assets to beneficiaries, or funding assets into beneficiaries’ trusts.
Although similar, the process will differ according to whether the decedent was single or married at the time of death, and if married, whether the decedent was the first spouse to die or the second spouse to die.
Relevant NEET Blog Categories:
Estate Plan Litigation, Executor, Fiduciaries, Grantor Trusts, Living Trusts, Pay-on-Death Accounts, Trust Administration, Trustees
FAQs – Trust Administration
¶ What is Administration?
Administration is the process of collecting and managing a decedent's property, paying taxes and creditors and distributing the remaining property to beneficiaries.
¶ What is the Alternate Valuation Date?
The alternate valuation date is a date six months after the decedent died at which time the decedent's estate may be valued. If the alternate valuation date would save federal estate taxes versus a valuation based on the decedent's date of death, the alternate valuation date may be used for estate tax filings.
¶ What is the Annual Gift Exclusion?
The annual gift exclusion is the amount that an individual may pass to anyone free of federal gift or other transfer taxes. In 2010, the annual exclusion amount was $13,000.
¶ What is an Ascertainable Standard?
An ascertainable standard defines the permissible standard for making distributions of income or principal from a trust. Ascertainable standards that are acceptable to the Internal Revenue Service are used so that the trust assets are not considered part of the recipient’s gross estate. The most commonly used ascertainable standard allows distributions for health, education, maintenance or support.
¶ What is a Beneficiary?
A beneficiary is someone who receives property according to the terms of a will or receives equitable title to property in trust according to the terms of a trust.
¶ What is a Credit Shelter Trust?
A credit shelter trust is a trust that preserves a decedent's unified credit for estate and gift tax purposes. The trust "shelters" the decedent's estate tax exclusion so that married couples retain two estate tax exemptions rather than just one.
¶ What is a Disclaimer?
A disclaimer is a person's refusal to accept rights or interest in specific property offered to the person. A successful disclaimer must be done within nine months, and must follow specific requirements, so it is important to discuss with a CPA or attorney when contemplating a disclaimer. When property is disclaimed, it passes as if the disclaimant were not alive at the time.
¶ What is Domicile?
Domicile is one's permanent state of residence.
¶ What is a Donor?
A donor is someone who makes a gift.
¶ What is an Estate?
One's estate is the total of your assets, debts and other obligations. Estate can be used in different contexts, for instance probate estate (all assets passing through probate) and estate tax estate (all assets subject to federal or state estate tax).
¶ What is the Estate Tax?
The estate tax is a tax imposed on transfers of property after death. Many states, including Vermont, impose an estate tax in addition to the federal estate tax.
¶ What is a Fiduciary?
A fiduciary has a legal duty to act in the best interest of another, for example a trustee has fiduciary obligations to the beneficiaries. Fiduciaries generally have a duty of loyalty, a duty of care and a duty to account.
¶ What is the Generation Skipping Transfer Tax (GSTT)?
The GSTT is a federal tax imposed on outright gifts and transfers in trust to beneficiaries two or more generations younger than the donor. An available GSTT exemption equals the federal estate tax exemption amount.
¶ What is the Gift Tax?
A tax imposed on transfers of money or property during the giver's lifetime.
¶ What is a Grantor Trust?
A grantor trust is a type of trust whereby the person who created the trust is treated by the Internal Revenue Service as the owner of the assets in the trust for tax purposes. Most revocable living trusts are grantor trusts.
¶ What is an Irrevocable Trust?
An irrevocable trust is a trust that may not be modified or terminated by the grantor after execution.
¶ What is Joint Tenancy?
Joint tenancy is a form of ownership where two or more people own property together, and if one of the joint owners dies, their share passes to the remaining joint owners. A form of joint tenancy for married couples is known as tenancy-by-the-entirety.
¶ What is the Marital Deduction?
The marital deduction is the amount that one spouse can pass to the other free of state or federal taxes. Currently, the marital deduction is unlimited, meaning that a spouse can pass an unlimited amount of money or assets to their surviving spouse tax free.
¶ What is a Marital Deduction Trust?
A marital deduction trust is often included in a living trust to hold assets exceeding the decedent's estate tax exclusion amount. By holding the excess assets in a trust that qualifies for the unlimited marital deduction, taxes are delayed until the death of the second spouse.
¶ What is Personal Property?
Personal property is anything that is movable, such as the contents of a home, automobiles, equipment and cash.
¶ What is Per Stirpes?
Per stirpes is a method for allocation of assets according to a family tree where descendents of a deceased ancestor split the ancestor’s share equally. For example, Parent has four children, A, B, C and D. If D is deceased and has three children, those three children would split D’s one-quarter share of Parent’s inheritance equally.
¶ What is a Power of Appointment?
A power given by a donor to a person allowing the person to select one or more recipients of the donor's estate or income. Powers of Appointment are usually included in the language of a will, deed or trust.
¶ What is Real Property?
Real property is land, also known as real estate, and anything that is permanently attached to the land, such as a home, office building or farm barn.
¶ What is a Revocable Living Trust?
A revocable living trust is created by the settlor while the settlor is alive to achieve various estate planning goals, including reducing or eliminating federal and state estate taxes, avoiding probate, providing for stability in the event the settlor becomes incapacitated, and creating a smooth transition and transfer of assets to the beneficiaries after the settlor dies.
¶ What is a Settlor?
A settler is the person who creates a trust and transfers property to the trust.
¶ What is a Spendthrift Provision?
A spendthrift provision restricts both voluntary and involuntary trust distributions to a beneficiary, usually to protect the beneficiaries interest from creditors’ claims.
¶ What is Tenancy-by-the-Entirety?
Tenancy-by-the-entirety is a form of joint tenancy for married couples.
¶ What is Tenancy-in-Common?
Tenancy-in-common is a form of ownership where two or more people own property together, but if one joint owner dies, the property passes to decedent's beneficiaries or heirs, and not the other joint owners.
¶ What is a Testamentary Trust?
A testamentary trust is included in a will and comes into being only after the will maker dies and the assets pass through probate first.
¶ What is a Trust?
A trust is a fiduciary relationship established between the trustee and the beneficiary where the trustee is the holder of legal title to property that is being held for the benefit of the beneficiary. Trusts come in many forms, but the majority of trusts used in estate planning are knows as revocable living trusts, or inter vivos trusts. Revocable living trusts may be amended or revoked by the trust maker, known as the grantor. Advanced estate planning often incorporates irrevocable trusts, which may not be amended after going into effect.
¶ What is a Trustee?
A trustee is a person who has legal title to property, but holds it in trust for the benefit of another (beneficiary) and owes the beneficiary fiduciary obligations.
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