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How Do You Close a Trust Administration?

If you ask any Trust beneficiary, they will tell you that closing a Trust administration is easy. The Trustee gives the beneficiaries all the assets, and they all live happily ever after. But Trustees often see the end of the Trust with far more reservation because of their potential future liability. You see, Trustees don’t want to be sued in the future after all the Trust assets have been distributed.

 

How the Trustee Could Close the Trust Administration

One way for a Trustee to end a Trust administration is by asking the beneficiaries to sign a consent and release. This option works well when the Trustee has: (1) fully disclosed all actions they took as Trustee, (2) provided a proper Trust accounting to the beneficiaries, and (3) has answered all relevant questions and concerns of the beneficiaries. In other words, where a Trustee has acted reasonably, and the beneficiaries are comfortable with the Trust administration. In that event, the Trustee can ask the benefices to sign a release, which would excuse the Trustee from any legal liability, and the beneficiaries can comfortably do so.

Filing a Formal Trust Account

Where there are issues, however, then a release will not work. In that event, the Trustee would need to file a formal Trust account with the court. Once the accounting is filed, all the Trust beneficiaries will receive notice of the hearing and a copy of the petition and accounting. If there are any issues, the beneficiaries can appear in court and voice their objections. Once the court makes any adjustments and approves the accounting, then the Trustee cannot be sued later for any actions they took as Trustee (provided the actions were disclosed in the accounting).

The downside of a court accounting is the costs. The Trust must pay for the preparation of the accounting, and the fees required to file it with the court and seek court approval. It costs the Trust far more than simply signing a consent and release. But where the Trustee has not acted properly, or has not fully disclosed their actions, a court-approved accounting is the only option. The same is true where any Trust beneficiary refuses to sign a release, then a trust accounting may be the Trustee’s only option to close the door on legal liability.

Closing your Trust may not be so easy after all. It pays to communicate with your Trustee and work with them to successfully, and efficiently, shut down the Trust. If you cannot work with your Trustee, then a court accounting may be the only way to end your Trust administration.