On the latest episode of The Probate Realtor Show, Matias Baker Masucci had Kevin Bayley, an attorney at KJM Law Partners, on the show to talk about trust administration. 

What is Trust Administration?

Trust administration is the process of managing and distributing a deceased person’s assets according to their trust. While the goal of setting up a trust is to avoid the long and expensive probate process, trust administration still requires filling out important paperwork to make sure assets get distributed correctly. Bayley said although it’s quicker and less expensive than probate, it still involves the navigation of legal complexities. Many people hire attorneys to administer trusts to avoid conflicts with family members down the line.

The Importance of Proper Planning

Bayley’s experience in administering trusts has taught him the importance of meticulous planning. He said families think disagreements over money won’t happen but he’s seen many cases where relationships get strained because of misunderstandings or perceived unfairness in the trust distribution. That’s why he stresses the need for detailed planning and preparing for all scenarios so there’s clarity in the documents to avoid disputes.

Funding the Trust

One of the most important steps in the trust setup process is funding the trust—transferring ownership of assets into the trust’s name. A trust is meaningless if the assets aren’t titled into the trust. Bayley said many people overlook this step and it causes problems later. Without properly funding the trust families may face legal hurdles in distributing assets that could have been avoided.

Handling Unfunded Assets: The Heggstad Petition

When assets are left out of the trust the process gets more complicated. Bayley explained the Heggstad petition, a legal process in California to transfer assets that were supposed to be in the trust but weren’t. This petition can avoid probate when there’s clear evidence the person intended to include the asset in the trust but didn’t. But this process is complex and best handled by legal professionals as it requires knowledge of estate law.

Managing Complex Estates with International Assets

For high-net-worth individuals, the complexity increases especially when there are international assets. Bayley talked about how different countries recognize or don’t recognize U.S. trusts which can create legal headaches. In these cases, you need to work with professionals in those countries to make sure assets are handled according to the trust and the legal requirements of each jurisdiction. Planning and coordination with foreign legal partners is key to making international assets go smoothly.

The Role of Taxation in Trust Administration

Tax is another big piece of the trust administration puzzle, especially for larger estates. If an estate is near or above the federal estate tax exemption, you’ll need to file an estate tax return. Bayley explained the importance of appraising assets early in the process, even for smaller estates, to determine the accurate value and ensure tax compliance. Proper management of estate taxes can prevent further complications and delays in the distribution of assets.

Choosing the Right Trustee: Family Member or Professional?

One of the biggest decisions in setting up a trust is who will be the trustee. Many people appoint a family member, but Bayley advises his clients to consider a professional or corporate trustee especially when there are multiple beneficiaries. Family members may not always act objectively and disputes can arise. Professional trustees are neutral third parties who can handle the responsibility without personal involvement. Bayley also said being a trustee comes with personal liabilities and a professional trustee can mitigate some of those risks.

A Service-Oriented Legal Practice

Bayley’s journey into estate law was driven by his desire to give his clients real results. Unlike other areas of law, estate planning gives clients peace of mind knowing their loved ones will be taken care of and their assets distributed according to their wishes. Trust administration, which often involves clients during difficult times, allows Bayley to help alleviate the legal and financial burdens for them.

Conclusion

Trust administration is a critical part of the estate planning process, and understanding it can help families avoid legal headaches and disputes. From planning and funding the trust to taxation and international assets, working with an experienced attorney like Kevin Bayley can make the process easier. His expertise, especially in navigating the pitfalls and planning for the future, is priceless for families wanting to protect their assets and have their wishes respected.

For those looking for legal assistance with trust administration, Kevin Bayley can be reached via email at KJM Law Partners.