While establishing a trust for an estate is going to significantly reduce the amount of work done in probate court, there are still plenty of mistakes that can be made when administering the trust properly. Carrying out the final wishes of a decedent may seem straightforward at first, but even the most basic trusts can get complicated once it comes time to disburse funds. Here are some of the most common mistakes made while probating a trust.
Assets are Difficult to Determine
A basic trust can allow all assets of an individual to be placed into a trust upon their death. The trust is then considered funded, and the money within the trust will be disbursed among the named heirs. The process can take much longer than expected for a number of reasons, the first of which is that the assets are not well organized. If real estate is involved, more time may be needed in order to liquidate the assets. If the deceased did not keep careful records of all of the assets that will be used to fund the trust, sifting through paperwork and investigating can take extra time.
Proceeds are Disbursed Too Fast
Sometimes an asset has a specifically named heir, yet the asset ends up in the general trust accidentally. For trustees who are inexperienced, the desire to disburse funds quickly can lead to a number of mistakes. For assets such as life insurance policies, these usually have a named heir and don't go through probate court. Money should never be disbursed until the inventory of assets is complete and the estate taxes have been paid. The trustee has to file form 706 with the IRS, and no money should be given out until the IRS confirms the 706 estate tax return with a Closing Letter.
State Estate Taxes May be Due
At this time, estates valued at $5.49 million per individual do not have to pay federal taxes. There is no need for a federal estate tax return to be filed, but the estate may have to pay state taxes before the money can be properly distributed. In addition, inheritance tax may need to be paid. Both state taxes and inheritance taxes must be paid out of the estate before the money is distributed to the rightful heirs.
Some trustees are inexperienced, and have a hard time carrying out the job of probating a trust. As an heir, you may be concerned when you have questions and you aren't provided any answers. The trustee must provide an accurate accounting of all assets of the estate, and disburse the assets according to the trust established. When a trustee gets overwhelmed, all kinds of problems can occur. Taxes can be missed, and heirs are left wondering where their money is. Individuals left in charge of an estate who are not up to the challenge can hire an attorney to complete the process on their behalf.