Trust and Estate Administration in California
Trust and Estate Administration in California can be very time consuming, a great deal of work, it will require patience, persistence, communication with beneficiaries, organization and in the end it can be very rewarding.
When the person who made a trust dies, the trust needs to be administered by the trustee named in the document in order to manage trust property according to the trust document’s terms and for the benefit of the beneficiaries after the settlor’s death. You must always keep in mind that you were chosen to carry out the wishes of the decedent after his/her demise.
In looking at a timeline for completing the trust administration process, it truly varies upon the different circumstances of the trust that is now part of your fiduciary duty to carry out. Administering a trust of a married couple when one spouse passes away, for example, can be completed in a few short months but that is only if it is a straight forward non-complicated trust. No trust is ever alike. Every person in this world has a variety of dynamics that must be taken into consideration. Settlement of a large trust with multiple beneficiaries can be more complex and thus take longer to complete especially if the trust calls for splitting the trust into several other trusts or if children are involved from prior marriage/s, etc. The time it takes will depend on the helpfulness, organization and efficiency of everyone involved. Delays should be expected there are any complications that arise, such as deed title problems, income/property tax issues, or if there are any disputes that arise with beneficiaries or creditors.
If you are a trustee, it’s important to set a timeline for administering the trust and outline a budget for administration costs. The timeline and costs should be communicated to trust beneficiaries as soon as possible. Many trust litigation cases arise simply due to lack of communication between trustees, beneficiaries and the trustee withholding information.
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Please keep in mind that Trust and Estate Administration in California can be quite complex depending on the way the trust was written, the changes in circumstances since the trust was written, the overall family dynamics and in some cases who was chosen as beneficiaries by the decedent.
Below you will find an overview of the all of the steps that will be/may be involved:
1. GIVE NOTICE TO ALL HEIRS, BENEFICIARIES AND POSSIBLE CREDITORS
Trustees are required by law to give notice of the trust administration to all legal heirs and beneficiaries as well as potential heirs and anyone who would think they should have been included in the Trust terms. There is a specific legal form that is required for you to prepare which must be mailed by the U.S. Postal Service. Once you (as the Trustee) have mailed this notice, any party wishing to contest the trust must do so within 120 days of receiving this notice. In addition it is suggested that you also notice potential creditors. By doing so the creditor claim period can start to begin. The importance of this is that any creditor claims against the trust which are submitted to be paid by the Trustee after the creditor claim period has expired, do not have to be paid.
2. IDENTIFY ALL OF THE TRUST ASSETS OF THE DECEASED
It is extremely important that you as a trustee to identify and marshall all assets of the deceased. Keep in mind that the Trustee can be held liable if anything should happen to trust assets or if trust assets disappear. The trustee is responsible for ensuring no assets are stolen, lost, or destroyed. It is also the responsibility of the Trustee to maintain the health, the nature and the value of every asset that is marshalled.
3. INVEST TRUST ASSETS IN INTEREST BEARING ACCOUNTS
During the time (whether short or lengthy) it takes to administer a trust, the trustee has a fiduciary duty to invest assets in a reasonable manner that does not dissipate. For liquid funds, this would mean you would invest in a way that minimizes the risk but also it means that the estate will earn a reasonable return. Real property that is not being utilized (vacation property, a ranch, rental properties) should either be rented, maintain the rental tenants or sold within a reasonable amount of time. But you must also keep in mind: you should not SELL any real property until the time period for the notice (listed above) has expired.
4. OBTAIN TITLES
Titles of assets contained in the trust (which may or may not be titled in the name of the trust) need to be gathered by the trustee. You may find a few titles of assets not titled in the name of the trust but were intended to be in the trust. It may mean that the trustee needs to order the title (which may take some length of time), the trustee may need to make appts to obtain title (i.e. DMV, the county recorder, etc.).
5. GET APPRAISALS
Appraisals for all trust assets will need to be obtained as soon as possible. An appraisal/appraisals will become Important for future income tax due to the fact that there will be cost basis adjustments (step up in basis).
6. PAY ANY DEBTS OWED BY THE ESTATE
Failure to pay a creditor can possibly result in personal liability to the trustee if the debt was owed, the trustee knew about the debt and the trustee did not pay the debt.
7. FILE TAX RETURNS
It is the fiduciary duty of the trustee to file all tax returns. This includes personal returns of the decedent, trust taxes, and taxes due from the probate estate, if applicable. It may require obtaining the last filed tax return of the decedent or using the same tax-preparer that the decedent used or has used in prior years.
8. PREPARE TRUST ACCOUNTING
Trustees have a legal duty to prepare a trust accounting, according to the format prescribed by the California Probate Code. The accounting must follow specific formatting and provide detailed information. The accounting is for the beneficiaries and possible heirs and will include a summary of all that has occurred following the death of the settlor. The accounting can be prepared by the trustee but due to the complicated and tedious efforts, if is usually more cost effective to hire someone who is experienced with the preparation of such accounting.
9. PREPARE THE DISTRIBUTION PLAN
Trusts can be distributed in a variety of ways. They can be partial distributions or they can be full distributions. Distribution will depend upon instructions outlined by the trust documents and any applicable state law. The trustee’s fiduciary duty is to prepare a plan of distribution that follows the terms of the trust and minimizes expenses. Additionally, prior to the distribution the trustee must also obtain the consent of all beneficiaries.
10. DISTRIBUTE THE TRUST ASSETS ACCORDING TO THE TRUST INSTRUCTIONS
Once the trust is ready to close and all of the above items have been completed, the trustee must take the necessary steps for distributing the trust which may include title transfers, preparations of deeds, as well as any other tasks required to settle and close the trust.
