Estate Planning as the center of Wills, Trusts, Probate and Power of Attorney

But how is settling an estate through a trust different from settling an estate through a Last Will and Testament?   ….  In either case you have to tie down the operative legal documents (Trust or Will, including any amendments), identify beneficiaries, and determine who is in charge of the estate settlement (executor/executrix/personal representative OR successor trustee for a trust).

The Difference in settling an Trust and a Will? …. All Wills are settled through court, through a probate court case.  Trusts are settled privately ….  in a private trust settlement.


     General Rule: Trusts avoid probate.   

      Trusts can usually be settled outside of court, without there being any probate at all (a “private” estate settlement).  Assuming that there are no disputes, problems or assets outside the trust. 


     Why even with a trust sometimes there is a probate.

     The public assumes that if you have a Living Trust that the client will then automatically avoid probate. That is definitely not the case for all clients.  A trust avoids probate only for assets that are funded into the trust.  So if assets are outside the trust, some assets may be subject to the probate process despite the client having a “Living Trust.”  


       Can you have both a Private Trust Settlement and a Probate?


         Yes some estates end up with both a trust settlement and a probate.  Surprisingly, this result is not always very detrimental.  If there is a trust settlement over a $1 million in assets, probating a $30k account left out of the trust might not be a lot of extra cost or trouble.  On the other hand, if in the same estate all $1 million in assets was left out of the trust (not “funded” into the trust) then the result might be a significant amount of additional expense.


     Does the existence of a Will, or Filing it with the Clerk of Court create probate?

    NO!  The existence of the Last Will and Testament alone does not create probate.  The custodian of the Will has a duty to deliver the Will to the Clerk of Court, but doing so does NOT “create probate.”  


    Yes, it is true that “all Wills go through probate.”  However, the executor only needs to start the probate process if there are assets that need to be distributed through the probate.  If there are no such assets to be distributed through probate, then the Will merely stays on file with the Clerk of Court with no probate case started.  


   This is actually quite common, with a living trust and all assets funded into the trust.  Many Florida residents/decedents have a Will tailored to pair with the trust, but no probate results.  Note the key language that all assets are funded into the trust.  If assets are outside the trust, and not in beneficiary form or joint name, then a probate results even despite the fact that the clients created a living trust.  Besides assets funded in a living trust, assets in joint name or with a beneficiary named also do not go through probate.

Settling a Trust; Picture shows arms of two persons shaking hands, representing settling the outstanding trust issues 

     How does the successor trustee settle the trust?

           Some Trusts continue onwards. 

         After the death of the trust creator(s), many trusts have directions to wrap up the trust and distribute the assets.  However, this is not true for all trusts.  Some trusts instead have directions for the assets to remain in trust after the trust creator(s) death.  For trusts that continue, the some of the activities in settling the trust described below need to be appropriately modified.

          Basic Steps in settling a trust.

       Whether under a Will or a Trust, a settlement of an estate involves the following steps: collecting and accounting for the assets, communicating with beneficiaries, sending accountings to beneficiaries, clearing claims of creditors and settling estate taxes if any, settling disputes among beneficiaries, and finally distributing the assets of the estate or trust.

          Identifying beneficiaries and determining who is entitled to what amounts/percentages.

         The trust document and all other estate documents need to be legally examined to determine beneficiaries.  A trust settlement agreement should be considered.  A trust settlement agreement protects a successor trustee by making sure that all beneficiaries agree who gets what.  A successor trustee would be in an awful spot if he/she distributed the trust in full, only to find out that one or more of the trust beneficiaries disputes which trust controls, or disputes an interpretation of the trust language.


          Notice of Trust to the Trust Beneficiaries and to the Clerk of Court is REQUIRED by Florida law.

          As a successor trustee takes over the trust, there are two formal trusts notices that are required by Florida law.  Each notice has a separate format:  one notice goes to the Clerk of Court and one to Trust Beneficiaries.  The successor trustee should retain a qualified Florida attorney to make sure the legal notices are done properly.

         Marshaling trust assets.

        The successor trustee needs to investigate all possible Trust, Estate or Probate Assets.  The successor trustee then collects, administers, and manages the trust assets.


          Estate Creditors.

          The successor trustee needs to deal with the possibility of creditor claims BEFORE distributing trust assets to trust beneficiaries.   In Florida the typical “living trust” is responsible for any debts or claims that could be filed in a probate case for the decedent.  This result is actually not true for all trusts, but is true for the most typical kind of trusts used.     


           Accounting for all actions of the trustee.

      A successor trustee is REQUIRED by Florida law to file formal accountings and deliver them to trust beneficiaries.  However, if ALL trust beneficiaries waive  in writing the formal accountings, then the successor trustee may be able to only deliver informal accounting disclosures.  Formal accountings can take time and expense; so you may want to consider the waiver route.  However, the successor trustee needs to consult and work with a qualified estate attorney to draft written waivers and consider the extent of informal accounting disclosures.   

     Successor Trustee is Legally Responsible

         Settling an Estate or Trust is a big responsibility.  The executor or successor trustee needs to: 1) design and execute a communications plan with beneficiaries, 2) design accounting methods to track estate and trust assets so that accountings can be delivered later in the process, 3) retain qualified professionals (attorneys, accountants, etc), 4) gather assets, 5) carefully follow and adhere to the relevant documents (Trust or Will), 6) follow all applicable laws, and avoid conflicts of interest, self dealing and mismanagement.

      A CEO of a business often has leadership authority to set the direction of the business.  An executor or successor trustee usually lacks that lattitude.  The executor or trustee is bound to follow both the Will/trust instrument and all applicable laws; and is not free to set a new direction as they wish.  The liability/responsibility of an executor or successor trustee is a “fiduciary” responsibility.  This means that the executor/trustee is legally liable for damages if the laws and document’s direction are not scrupulously followed. Failure to follow the governing documents and comply with applicable laws can lead to a court assessing damages.  But liability can be avoided by communication, prudence, accounting, and caution.