Illinois Trust Administration
With the exception of ensuring proper funding, living trusts require minimal maintenance during the grantor’s life. After the grantor’s death, however, the trust document essentially springs into life, becomes irrevocable and fiduciary actions are required. While every trust and estate is different, post-death trust administration typically includes, among other actions, some or all of the following by the trustee:
- Application for tax identification number from the IRS for purposes of filing any applicable trust income tax returns (Form 1041).
- Notifying relevant third parties of the death, successor trusteeship and new taxpayer identification number.
- Filing tax returns — decedent’s final 1040, post-death trust income tax returns (1041) and estate tax returns, when applicable.
- Making decisions regarding investment and disposition of assets.
- Providing for and paying any federal and/or state estate tax, if applicable.
- Paying the decedent’s debts and the trust’s administration expenses.
- Creating and funding any sub-trusts that are created under the terms of the original trust document.
- Dividing and distributing (or retaining in trust) appropriate shares to (or for the benefit of) the named beneficiaries.
- Accounting to, and communicating with, the trust’s beneficiaries.
- Carrying out any other pertinent terms of the trust instrument.
The length of time that it takes to settle the trust and distribute assets is often dependent on whether an estate tax return is due. If a return will be due, then it is typically prudent to wait until after a closing letter is received from the IRS to make final distributions. This may take 18 months, or more if the estate is audited, after the date of death. Additionally, the statute of limitations for claims after death for non-probate estates is 2 years, so a prudent trustee may hold some funds in reserve for potential claims.
While trust administration is generally far less costly, lengthy, complex and time consuming than Illinois probate administration, it is still prudent for the trustee to retain counsel to assist and advise in carrying out the trustee’s important fiduciary duties. These duties are governed by the express terms of the trust, the Illinois Trusts and Trustees Act and by Illinois common law. A trustee is generally entitled to receive trustee’s fees and to pay attorney’s fees from the trust assets during post-death trust administration.