Estate and Trust Administration: A Comprehensive Guide

10/11/20248 minute read

Trusts and estates are two of the most common terms you’ll hear when talking about estate planning. If you’ve dealt with the passing of a parent or another close relative, you might even have first-hand experience. Yet even if you know the basics, you may still have questions about estate and trust administration: What are they? How are they different—and how are they similar? And which one do you need as part of your own estate planning? This article has the information you need.

What Are Estate and Trust Administration?

Both estate and trust administration involve managing someone’s assets according to their wishes. Trust administrators manage and distribute the assets held in a trust, while estate administrators oversee assets according to a will or probate court. The administrator takes care of tasks like:

Identifying and listing assets
Determining the value of assets
Managing and protecting assets
Settling debts and filing taxes
Transferring assets to beneficiaries

The person appointed to carry out the administration of a trust or estate must act in the best interests of the beneficiaries—those who stand to gain from the trust or will—and in accordance with the terms of the document. They’re usually a neutral third party who is either named by the owner of the assets or assigned by a court. If the appointed person is not a lawyer, they often choose to hire one to help them.

What’s the Difference Between Trust and Estate Administration?

While they both refer to overseeing assets, there are a few important differences. Trusts are typically created during someone’s lifetime, to both manage and protect assets while they’re alive and also ensure they’re distributed appropriately after their death. Trust administration is an ongoing process that follows terms set out in a trust document. The administrator is called a trustee.

An estate, on the other hand, is everything that someone owns when they pass away. This includes assets like real estate, vehicles, investments, and life insurance money, as well as liabilities like mortgages or credit card debts that need to be paid off. Estate administration is a one-time process that follows terms set out in a will or decided by state law or probate court. The administrator is called an estate executor.

What’s the Difference Between a Trustee and an Estate Executor?

The administration of trusts and estates depends on a neutral third party, called a trustee or estate executor. Both play important but different roles in managing and distributing assets. A trustee is appointed by the creator of a trust, known as the trustor, through the trust document. The trustee's engagement begins as soon as the trust is established and can last for many years or even decades. Trustees manage ongoing responsibilities like investing assets, making distributions, and ensuring the trust complies with legal and tax obligations.

An estate executor is appointed through a will by the deceased person, or by the court if there is no will. The executor's role begins after the individual's death and is generally a temporary assignment, lasting until the estate is fully settled. This involves tasks such as inventorying assets, paying debts and taxes, and distributing the remaining assets to the beneficiaries.

What Are the Responsibilities of an Estate Executor?

An estate executor is responsible for the proper management and distribution of a deceased person's estate. Their responsibilities include:

Appraising assets: Identifying and determining the value of all assets, which may involve hiring professional appraisers.
Securing assets: Preventing loss, damage, or theft of the estate’s assets during the administration process.
Notifying creditors: Informing creditors of the estate owner’s death so they can submit claims against the estate.
Paying debts and taxes: Settling outstanding debts, including mortgages, loans, credit card balances, and taxes.
Filing tax returns: Preparing and filing the deceased's final income tax return, as well as estate tax returns.
Distributing assets: Transferring the remaining assets to the beneficiaries according to the terms of the will. If there is no will, they will follow state inheritance laws or work with the probate court.
Keeping records: Maintaining detailed records of all transactions, communications, and decisions to ensure transparency and accountability.
Closing the estate: Finalizing the estate, obtaining court approval if required, and formally closing the estate once all assets are distributed.

Throughout the process, they’ll also keep beneficiaries informed about progress, address their concerns, manage and resolve conflicts and legal disputes, and provide updates on asset distribution.

What Are the Responsibilities of a Trustee?

A trustee is responsible for the proper management and administration of a trust. Their specific responsibilities include:

Following trust terms: Administering the trust according to its specific terms and conditions, as outlined in the trust document by the trustor.
Fiduciary duty: Acting with loyalty, care, and impartiality in the best interests of the beneficiaries.
Managing assets: Overseeing investments, managing real estate, and ensuring all assets are productive.
Distributing income and principal: Making distributions to beneficiaries as specified in the trust document, either periodically or when certain conditions are met.
Keeping records: Maintaining detailed and accurate records of all transactions, decisions, and communications.
Reporting to beneficiaries: Providing regular updates and detailed reports about the trust's performance and any significant decisions that need to be made.
Tax management: Filing necessary tax returns for the trust and meeting all tax obligations.
Protecting privacy: Safeguarding the privacy of the trust and its beneficiaries, including personal, financial, and tax information and the details of businesses or real estate owned by the trust.

Like an estate executor, a trustee will keep open lines of communication with everyone involved and handle any legal disputes. Another way estate and trust administration are similar is that both require trustworthy individuals who are experienced in these areas of the law.

Can a Trustee Also Be a Beneficiary?

Yes, a trustee can also be a beneficiary of the trust. However, this dual role requires careful management to avoid conflicts of interest. The trustee must act in the best interests of all beneficiaries and adhere to the terms of the trust, and they can’t let their personal interests interfere with this fiduciary duty. If you find yourself in this situation, be sure to set clear guidelines and seek legal advice to navigate any potential conflicts.

Move Forward with Estate and Trust Administration

The biggest takeaway in the discussion of trust and estate administration is that creating a trust is something you can do right now as part of your estate planning. (Estate administration won’t happen until after your death, although you can still appoint someone to take care of it when you create your will.) Putting your assets into a trust can have tax benefits and help your beneficiaries avoid the probate process upon your death.

Whether you want to create a trust to protect your assets, or make a will and appoint an estate administrator, Plan Ahead Legal can help make sure your loved ones are taken care of and your wishes are honored. Just tell us about your needs and goals, and we’ll work together to make an estate plan that works for you. Contact us today and start planning for your family’s future.