Trusts can be excellent estate-planning tools in Arizona, but they require more work than most people realize. Trust administration involves fulfilling fiduciary duties, significant time and paperwork, and regular costs. The main fiduciary duties required when administering a trust are complying with Arizona and federal law, managing the funds in the trust, and overseeing the transfer of assets as dictated by the trust.
The process should be left to an experienced trust administration attorney in Arizona because it can be complicated and laborious. You can reduce the number of hours required by an attorney, and thus save money, by following these steps and collecting all the required documentation. Here are the most important things to understand about trust administration in Arizona.
Take a Complete Inventory of Trust Assets
The creation of a trust requires documentation of the value of every asset. This might be straight forward with some asset types, like stocks, bonds, or homes. However, it will require the investigative efforts of an experienced professional on other assets, like partnership interests and commercial real estate holdings.
In all cases, an accurate appraisal is required in order to see if the trust is subject to federal estate taxes. The trust inventory and valuation of all assets must be updated in Arizona as the value increases or decreases. Failure to accurately report changes in valuation could open the trust up to significant tax obligations and fees.
Make Sure All Taxes Are Paid
All Arizona trusts valued at more than one million dollars must file a federal estate tax return. There are tools available to reduce the estate tax and in some cases it can be eliminated. An exemption trust is a common option available. There will be additional oversight requirements for the trustees.
Trustees may also be required to file the decedent’s personal tax returns.
Provide Notices to All Beneficiaries
The state of Arizona requires trustees to provide notice to all beneficiaries when the trust becomes irrevocable upon the death of the trustor. The trustee is responsible for filing the will, in cases where there is one, with the county Superior Court. Any person who may benefit from the trust may request a copy of the trust document at any time. The trustee is also responsible for notifying the County Assessor of the death of the trustor in any county where they owned real property.
Trust Administration Duties in Arizona
When you become a trust administrator in Arizona, you are accepting a number of responsibilities for the trust and you may be liable for damages to the trust if you do not fulfill all of your trust administration duties. Here are the most important requirements for a trustee:
- Execute the terms and instructions of the trust;
- Treat all beneficiaries fairly and objectively;
- You owe a fiduciary duty to all beneficiaries;
- Keep all trust assets separate from personal accounts;
- Use professional caution when investing trust funds;
- Use reasonable diversification in investment strategy for protection;
- Keep comprehensive, meticulous records of everything.
Understand Full Scope of Trust Administration Powers
A trustee has the power to execute all terms and instructions laid out in the trust document, as long as they adhere to Arizona state law. This generally involves investing the funds in the trust, buying and selling assets, maintaining appropriate insurance coverage, handling any necessary repairs for trust property, and making payments to any beneficiaries.
The attorneys at MacQueen & Gottlieb can deliver cost-effective and diligent trust administration in Arizona. Our firm has significant experience with estate planning and can help find the best tools for you and your family. Contact us today to schedule an initial consultation or make an appointment online.