Probate and Trust Administration

 

Post-death administration of a person’s estate involves three main steps: (1) identifying and valuing assets; (2) determining who is legally entitled to receive the assets; and (3) transferring the assets to the beneficiaries. These steps are required if there is a Will or Trust.

If a person dies with assets in his or her name and without a beneficiary designation, a probate administration will be required to appoint a Personal Representative. A petition is submitted to the court and notice of the probate must be given to all interested persons. Once the court appoints a Personal Representative, probate assets must be collected and inventoried, debts must be paid and a final account must be prepared prior to distribution of the estate. In Minnesota, creditors have four months to assert any claims before assets can be distributed.

A trust administration begins with the death of the grantor, or the person who established the trust. A trustee of the trust is either directed to distribute all the assets or to keep the assets in trust for a period of time and for the benefit of other named in the trust. Like a probate administration, trust assets are inventoried, debts are paid and a final accounting is prepared.

Tax issues must be addressed for all decedents and three different tax returns may have to be prepared. The decedent’s final individual income tax return (IRS Form 1040) must be filed. If income is generated by the estate during the administration process or if real estate is sold, then a fiduciary income tax return (IRS Form 1041) may be required for every year the estate is open. Finally, an estate tax return (IRS Form 706 and Minnesota Form M706) must be filed if the decedent’s gross estate at the date of death exceeds the Minnesota and federal exemption amounts.

Families and beneficiaries frequently ask, “How much will all this cost?” The answer depends on a number of variables, including the amount of time spent, subject to adjustments for difficulty, the complexity of the Will or Trust, disputes among beneficiaries, claims made against the estate and accuracy of recordkeeping by the Personal Representative or Trustee. Our attorneys and paralegals work closely together on all post death administration client matters.