Trust Services

Proper Trust Administration begins with a required, properly prepared probate notice to all trust beneficiaries and heirs of the settlors. The required notice has several requirements of its own, each one of which must be met in order for the notice to be effective. If you are concerned or want to ensure that the administration of the trust is properly handled, please consult with an attorney for legal advice concerning your situation. Contact us if you need a referral.

An Affidavit of Death of Trustee and Consent of Successor Trustee should be recorded against each real property held in the Living Trust. This Affidavit is recorded with a certified copy of the death certificate. When it is recorded, it changes the title of the property from the trustee (usually the settlor) who has died and into the names of the new trustee(s). If the Living Trust will transfer the ownership of the real property from parents to children or in any other manner exempt from property tax reassessment, then the appropriate exemption form must be filled out and mailed to the county assessor’s office.

After identifying all of the other trust assets, e.g. bank accounts and investment accounts, have the title to those assets transferred into your name as successor trustee. Then, obtain a federal tax identification number for the trust in the same name as the trust so any income earned from those assets is reported correctly to the IRS. With the right information, you can obtain a federal tax ID number for your trusts online from the Internal Revenue Service. If you are working with an an attorney, this person can obtain the number for you.

Beware: Do not use your own social security number as an identification number when administering someone else's trust, or you will find yourself liable for tax on income earned by the trust, and not by you.

Have all trust accounts transferred to your name as successor trustee, using the new identification number. If you are administering a trust that is splitting into multiple share trusts as part of a distribution plan, each share plan needs its own federal tax identification number.

Assets the decedent has not placed into his or her trust before death are subject to the probate process as part of the decedent's estate. The most common way this situation can be dealt with during Trust Administration is through the use of a Will with a "pour-over" provision. This provision directs that any assets not placed into the trust during the deceased's lifetime will be put into the trust at death and distributed according to the terms and conditions of the trust.

Your attorney will prepare a document known as a Certification of Trust, which will identify you as successor trustee and set forth the scope and extent of your powers. The Certification will also set forth how title to the assets should now be held and will recite the new tax identification number to be used for all trust accounts. You will want to present this Certification to any financial institution holding trust assets in order to have the assets transferred to your name. All assets need to be inventoried and prepared for appraisal. Assets such as real property should be appraised immediately from the date of death

As successor trustee, it is your obligation to pay the settlor(s) valid debts and to satisfy any tax liabilities owed. If the total value of the estate (both trust and no-trust assets) is more than the exemption amount – currently $5,000,000 – then it will be necessary to file Form 706 federal estate tax return within 9 months of death. You will want to work closely with an attorney and an accountant to evaluate whether a federal estate tax return is required. If you need help finding these resources, we are happy to provide trusted referrals. Additionally, as successor trustee, you will be responsible for filing the last income tax returns for the decedent. You may also have to file fiduciary tax returns. Because a successor trustee may be held personally liable for unpaid taxes, you will want to work with your attorney and accountant to make sure that all tax liabilities are satisfied prior to distributing the trust assets to the beneficiaries of the trust.

A successor trustee who is administering an irrevocable trust may be required to prepare and render an accounting of their actions and administration of the trust. To satisfy that legal requirement, you must keep detailed accounting records of the trust. This includes keeping track of all the trust money you are spending to wind up the decedent’s final affairs, all deposits and disbursements from the trust, and reviewing the trust document to see what method of accounting is required. It is recommended you consult with an attorney early in the administration process to determine the scope of accounting responsibility. If you need a referral for an attorney, we are happy to provide you with one. Whether it is legally required or not, you will still want to keep detailed accounting in case the trust administration goes into litigation.

Before anything else, determine who the beneficiaries are. Often, a trust will simply direct that the assets be distributed outright to the various beneficiaries. However, it is quite common that the trust will dictate that assets for certain beneficiaries be held in trust for those beneficiaries. This requires that sub-trusts be established for those beneficiaries. As successor trustee, you will need to identify any sub-trusts that are required under the trust document and ensure that those sub-trusts are properly funded. Sub-trusts are especially common in administrations of trusts established by married couples.

It is highly recommended that you consult with an attorney regarding the funding of any sub-trusts prior to making any allocations of assets to the sub-trusts or distributions to any of the trust beneficiaries. If you have not already retained an attorney to help you with trust administration, you might consider retaining an attorney for the purpose of preparing a Trust Distribution and Termination Agreement. This agreement, when properly prepared, recites key components of the trust administration.

In situations where there is acrimony among the beneficiaries or towards the successor trustee, your attorney is likely to suggest you prepare a formal accounting of your actions as successor trustee and seek court approval of those actions and of your proposed distribution scheme. By petitioning the court for such approval, you minimize the risk of future litigation. If family dynamics the grieving process are not properly dealt with, these emotions and conflicts often play out in court in protracted and expensive trust litigation. Contact an experienced attorney to help you avoid such a result. If you need a referral to attorneys I know and trust, contact me.