Did a beloved family member name you as a successor trustee of their living trust? What a great responsibility they have entrusted you with. Now that you are in this entrusted position you want to make sure you approach this responsibility in the most beneficial manner possible. But do you find yourself a little lost in the fog maybe not knowing exactly what this responsibility entails? This article will go over what trust administration is and what is expected from you as the successor trustee.  

What is Trust Administration after the death of a Grantor?

A “Grantor” is one of the many terms used to refer to that beloved family member who created the trust and named you as the successor trustee (other terms used are Settlor or Trustor). Trust administration is the process of managing all trust assets/liabilties, such as bank accounts, real properties, retirement accounts, and investment accounts for the benefit of the named beneficiaries. Such assets are to be administered as instructed by the trust document and as set forth in the California Probate Code. The state of California expects you, as the successor Trustee, to fully understand and properly interpret the California Probate Codes.  

What is the difference between trust administration and probate

Probate is needed when a person passes away without a living trust. The word probate originates from the Latin word probare which means “to test or prove.” In the probate courts they “test or prove” wills. It is likely that your beloved family member created a living trust in order to avoid probate. Probate is a lengthy court process that involves the court’s supervision. Probate is normally more expensive than trust administration and as mentioned, the process is longer.  

What are some duties that must be performed by the Trustee?

Now that the Grantor has passed away, and you have assumed the role as the current acting trustee, we may now refer to you as “trustee” or “successor trustee.” It is important that you know and understand what your fiduciary duties are as a trustee. It is expected that you perform your duties in a manner in which you put the interests of the beneficiaries above your own. So what are a few mandatory duties that you are responsible for during this administration?  

Below is a list of a few mandatory duties and critical issues you must address as successor Trustee: 

  • Legal Compliance: Compliance with California Probate Code, federal tax law, and the terms of the trust document  
  • Tax Issue: Timely filing applicable Forms 1040, 1041, 706 and 709  
  • Mandatory notification of the administration of the trust (pursuant to probate code 16061.7) within 60 days from date of death  
  • Mandatory Lodging the will with the Court within 30 days after the date of death   
  • Decedent’s debt: Credit card debt & medical debt etc., who’s responsible? 
  • Asset appraisals date of date (step up basis to offset capital gain taxes)  
  • Applying for a Federal Tax ID number 
  • Keeping detailed accounting records  
  • Provide trust accountings to beneficiaries  
  • Affidavits of Death of Trustee (if real property is involved) 
  • Change in Ownership Statement Death of Real Property Owner within 150 days after the death of death (if real property is involved)  
  • County Assessor Forms: Preliminary Change of Ownership (if real property is involved) 
  • Grant Deeds (if real property is involved) 
  • Property Tax Savings: Claim for Reassessment Exclusion (Proposition 19, if applicable)   
  • Certificate of Trust  
  • Corresponding with financial institutions to claim trust assets  
  • Gather necessary/requested documents for financial institutions  
  • Heggstad Petition  
  • 13100 Affidavits  
  • Distributing assets  
  • How long does a trustee have to distribute the assets to beneficiaries? 
  • How to distribute trust asset? 
  • Communicating with beneficiaries -- Resolving disputes and controversies  
  • Dissolving the trust 
  • Do you need to obtain consents from the beneficiaries? 
  • How much of the trust assets shall you reserve for unforeseen claims/expenses? 

 When to hire a Trust Administration Attorney

Ultimately the responsibility of the administration of the trust comes down solely on the trustee and no matter how small or large the estate is, the state of California expects you to comply with all the duties that they have put in place through the probate code or else you may be subject to personal liabilities and lawsuits. It is always prudent to consult with an attorney at the start of an administration because like Socrates once said, “you don’t know what you don’t know.”   

The state of California acknowledges that what they expect from you is a heavy legal responsibility to bear and is not common practice, that is why they allow trustees to hire professionals, at the expense of the trust, to help you, meaning the trust will bear the costs, such as the attorney’s fees. Furthermore, an attorney can advise you as to what you are entitled to as compensation under the California Probate Code.  Make sure whichever attorney you hire is also a CPA who can help you ensure that the money you receive is tax free. 

We understand that navigating through the death of a beloved family member is difficult, and our objective is not to frighten you or overwhelm you with worry, but instead to inform you so that you can make the best decisions to protect yourself. Our firm is here to help you navigate through California’s complex legal and tax requirements by making the administration of this trust as easy and painless as possible.

Our firm will ensure that the administration is completed in compliance with California’s Probate Code and that upon the dissolution of the trust, you are relieved of any and all personal liability.

Mr. Horn is not only an attorney who is a Certified Specialist in Estate Planning, Trust & Probate Law but he is also a Certified Public Accountant (CPA). Don’t walk into this alone, please call our office to see how we may be of assistance to you.