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What is Elder Law? Part 4: Trust Administration


Elder Law: Trust Administration

When a loved one passes away, it can be a difficult and emotional time for everyone. The last thing on your mind is dealing with the complicated process of administering your loved one’s trust. However, as the trustee, it is your legal responsibility to do so in the best interest of the beneficiaries. As a Trust Administration Lawyer in Walnut Creek, I frequently help trustees administer their loved one’s estates. While it is not required that trustees hire an attorney for the administration of their trust in Contra Costa or Alameda Counties, it is often the case that a few thousand dollars in attorney’s fees will save you a great deal of frustration – and money – in the administration of your trust. An experienced attorney will have performed multiple Trust Administrations and should be highly familiar with your county’s court system and way of doing things. Knowing what a county judge expects in order to approve and grant orders is key to settling your estate in a timely, efficient, and cost effective manner.

What are the duties of a trustee?

Being a trustee is a large responsibility and if you don’t perform your duties properly, you could be personally liable. That’s why it’s important to hire the right people to guide you in this important role.

A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” If you have been appointed the trustee of a trust, this is a strong vote of confidence in your judgment.

A trustee’s duties include locating and protecting trust assets, investing assets prudently, distributing assets to beneficiaries, keeping track of income and expenditures, and filing taxes. (For more information on a trustee’s duties, click here.) As a trustee, you have a fiduciary duty to the beneficiaries of the trust, meaning that you have an obligation to act in the best interest of the beneficiaries at all times. It also means you will be held to a higher standard than if you were just dealing with your own finances.

How do I administer the trust?

A trustee is usually entitled to hire an attorney (and other professionals like an accountant) to assist in trust administration. The attorney’s fees will be paid from the trust funds. While hiring an attorney will cost money, not having an attorney at all could cost a trustee much more if errors are made.

A trust can be administered without court involvement, but that doesn’t mean that the administration is simple. There are many areas where problems can arise — for example, if assets aren’t invested properly, taxes are late, or if proper records aren’t kept. If something goes wrong during the administration of the trust, the trustee can be removed and held personally liable for any costs incurred or losses suffered. Even if a spouse is the trustee, he or she should still consult with an attorney. Many couples have so-called “AB” trusts to take advantage of the maximum estate tax exemption; these trusts require special knowledge to determine whether the trusts are properly funded and the taxes filed.

13 Steps to Administering Your Trust in California

Step 1

Obtain Certified Copies of the decedent’s (the trustee that has passed) death certificate. Copies of the death certificate can be ordered from the Coroner’s office. The county recorder can also provide these for a fee. It is generally recommended that the trustee have at least 10 certified copies.

Step 2

Locate and thoroughly read through the trust, will, and other estate planning documents. Review the terms of the trust – its distribution plan, the beneficiary list, and any other wished of the Settlors or Trustors of the trust.

Step 3

Locate trust assets. In probate law, this is known as the legal responsibility of the trustee to “marshal trust assets.” Schedule A of the Trust should contain a thorough list of all assets contained within the trust. Deeds of any real property will also need to be located. Each real property deed should list the trust, and not the individual as the titleholder of the property. Under California law, a probate may be necessary if this is not the case. Locate titles to all other property, including stock certificates, and transportation vehicles.

Step 4

Contact a Trust Attorney in the county in which the decedent resided. I work specifically with Trust Administration cases in Contra Costa County,  Alameda county, and Solano County. An experienced a qualifed Trust lawyer can assist you in resolving any issues around income or estate taxation, and can guide you through the trust administration process. A trustee is not required to hire an attorney, but it is generally advisable to consult with one before the trustee begins selling or distributing assets. This can help avoid possible complication that may arise from beneficiary lawsuits, or a host of other unforeseen events that frequently occur when administering a trust.

Step 5

Contact the probate court in the county in which the deceased resided. California legislation requires the trustee to notify the decedent’s heirs and the trust’s beneficiaries that the trust is irrevocable now that the original trustee has passed (typically the one who set up the trust and owned its assets). Contra Costa County and Alameda County require different forms of notice, and can be obtained from their probate courts. Under California law, beneficiaries and heirs have 120 days to contest the terms of the trust.

Step 6

Identify the assets of the decedent. Assets include those in the trust, and also those which may not have been transferred into the trust. For example, if the decedent had a pour-over will which stated assets outside the trust were to move into it upon his/her passing, the state of California requires it be submitted for probate. This way the trust will include the entirety of his/her assets.

Step 7

Obtain appraisals for all significant assets. Appraisals are important for the distribution of the assets, as well as for tax purposes.

Step 8

Transfer the titles of all assets contained in the trust into your own name as the successor trustee. In order to transfer the trust’s assets to the beneficiaries, you must first have ownership under California probate law.

Step 9

Collect the mail of the decedent. Submit a change of address form to the post office if necessary, so that you are able to properly and completely identify all of the decedent’s assets and debts. While you do not need to notify creditors of the decedent’s death, there are some circumstances in which you can be held personally liable for non-payment. An experienced trust attorney can help you safeguard against this.

Step 10

Contact the IRS   to get a tax identification number for the trust. Prior to his/her death, the decedent’s Social Security number is associated with the trust, so you must change this before you can pay taxes on behalf of the trust. Use the new TIN for both IRS and California returns.

Step 11

File Federal and California Tax returns for the decedent. If the trust brings in income after the decedent’s passing, or if the value of the assets exceed the exemption limit, the trustee is also required to file fiduciary tax returns on behalf of the trust. You may not be required, however, to file a California tax return for the estate.

Step 12

Contact an attorney or experienced trust accountant to calculate the amount you are allowed to pay yourself (from the trust) for yours services as trustee. California probate law states that the trustee may be entitled to between one and one point five percent of the trust’s value. This will depend on the the terms of the trust and other factors.

Step 13

Distribute assets and funds to beneficiaries. Once the decedent’s taxes and debts have been paid, funds and assets can be distributed to beneficiaries. If this is not done in the correct manner, or there is some mistake made by you as the trustee, beneficiaries may legally sue you or the trust for additional funds or to remove you as trustee. Sub trusts may also need to be established, should any of the beneficiaries be minors at the time of distribution.

Trust Administration can be complicated when there are multiple beneficiaries and substantial assets. If you need assistance administering your trust in Contra Costa County or Alameda County, the Law Offices of Matthew B. Talbot can help. Call 925-322-1763 to set up your free consultation today.

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