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How are administering an estate and a trust different?

On Behalf of | Mar 12, 2024 | Estate Administration |

How a relative plans to pass assets to family members is something to pay attention to. While you may anticipate becoming the executor of your loved one’s estate, your family member might actually have you in mind to oversee a trust.

While both an estate and a trust convey property and money to one or more people or even organizations, managing one sometimes involves different actions than the other.

Administering an estate

When you oversee an estate, you take charge of a wide range of assets, which may include real estate, investments, cash and personal belongings. If your loved one leaves a will, you follow its instructions for distributing the estate assets to the named beneficiaries.

Before distributing assets, you have to settle remaining debts owed by your relative. You must also pay any taxes and fees related to managing the estate from the estate funds.

Administering a trust

Overseeing a trust means you are the trustee of the trust. A trust creator funds a trust with money or physical property and names beneficiaries to receive the assets contained in the trust. As trustee, you follow the trust instructions for investing assets, paying bills, filing taxes and distributing funds to beneficiaries.

Differences in oversight

Managing an estate means you make a one-time transfer of assets after your relative has died. Once you close out the estate, it is gone. However, a trust can span many years, even generations, and may disperse assets over a longer span of time. Also, your relative could set up a trust and activate it while they are still alive, so you may still consult with your family member about how to operate the trust.

Additionally, an estate may require probate, so the process is public. By contrast, trusts typically avoid probate, so you have more privacy as you oversee the trust. Also, creditors have the right to seek compensation for debts from an estate, while trusts can protect their assets from creditor claims.

Though occasionally similar, overseeing an estate or trust involves different processes and responsibilities. A person suited for executor duties might experience difficulties with a trust and vice versa. Understanding how these processes work may help you determine if you can handle the responsibilities involved.