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Top 10 Things California Successor Trustees Must Do

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If you have been named a successor trustee of a California trust, it can be daunting.  What are your duties?  What is expected of you?  What do you do first?  How do you administer a trust? These are all great questions.  Get a copy of the trust so you know what you are administrating.  To help you out, we have compiled a list of 10 things to do for a successor trustee of a California trust.  

1. Know Your Trust

Read the trust thoroughly.  As a successor trustee, you need to understand the trust so you know what you are administering.  Not all beneficiaries are treated equally.  Some beneficiaries are entitled to distributions earlier than others.  As the trustee, you must know what is owed to the beneficiaries and how the trust works.  If you do not understand the terms of the trust or how to administer the trust, consult with an attorney.

2. Understand Your Duties and Responsibilities

In addition to the duties and responsibilities that are specifically stated in the trust, understand your statutory duties and responsibilities.  Navigating a trust administration can be similar to navigating a mine field.  The beneficiaries can hold the trustee responsible for damages if the trustee violates his duties to the trustees.  It is important as the successor trustee you understand all of your duties and responsibilities under the trust and the California Probate Code.

3. Gather A List of Assets Decedent Owned At The Time Of Death

As the successor trustee of a California trust, it is your duty to administer the trust assets.  You will also need to a list of assets the decedent owned at the time of death that were not held in the trust.  If assets were held not titled in the trust but should have been in the trust, you will need to determine what to do with those assets.  You will also need to value the assets as of the date of death.  The value of the assets will be needed for the inventory and accounting the beneficiaries will receive from you as well as for tax purposes.

4. Pay Bills

The trustee is responsible for reviewing the decedent’s bills  and determine who the creditors are.  The trustee is also responsible for paying the creditors using trust’s assets.

5. Paying Fiduciary Fees

As the trustee, you are entitled to charge the trust for reasonable compensation of your services.  In Santa Clara County and San Mateo County, the amount of compensation a nonprofessional trustee can charge the trust is betweeen $25 to $35 per hour.  To be compensated, you will need to keep track of your time.  This should include the date the task took place, how long the task took you to accomplish, time you started the task and a description of the task.  The trustee fees are an administrative cost to the trust.  As the trustee you should also keep track of any out of pocket expenses as well as the your mileage.  

6. Filing Tax Returns

As the trustee, you have an obligation to file an estate tax return if there is a taxable estate.  For the 2019 tax year, if the estate is over $11.4 million, an estate tax return (IRS Form 706) will need to be filed.  The trustee will also need to file a final personal tax return (IRS Form 1040) for the decedent from January 1st through the date of death.  Trust income tax returns (IRS Form 1041) will need to be prepared for every year the trust is in existence until it the administration is dissolved.

7.  Re-Titling Assets

When the decedent passed away, all of the assets were under the decedent’s social security number.  After the decedent passed away, the decedent’s social security number can no longer be used to report and dividends.  The trust’s employer identification number should be used to report income and dividends after the date of death.  Additionally, the assets need to be retititled to reflect the successor trustee’s name.  If there are assets under the decedent’s individual name, there wil need to be either a probate opened or a petition filed with the court to request the court confirm the assets are to be held in the name of the trust.

8. Keep the Beneficiaires Informed

As the successor trustee, you will need to send out a statutory notice to the beneficiaries of the trust and heirs at law that is compliant with California Probate Code Secton 16061.7.  The trustee has a duty to keep the beneficiaries informed regarding the trust administration process and the assets of the trust.  

9. Managing the Trust Assets and Accounting 

The successor trustee has a duty to invest as a “prudent investor” and diversify the assets.  The trustee is responsible for gathering, inventorying, managing and protecting the assets of the trust.  At least annually the trustee must provide an accounting to the beneficiaries of the trust and when the assets are distributed to the beneficiaries.  The beneficiaries are allowed to review all of the statements and receipts.  If the beneficiaries believe the trustee has acted improperly or they are disputing the accounting, the beneficiaries can file a petiton with the probate court requesting the trustee be held responsible for any improper actons or excessive expenses.

10. Distributing the Assets of the Trust

The successor trustee is responsible for making the distributions to the beneficiaries pursuant to the terms of the trust.  The trust administration process length can vary.  If the trust distributes income or principle to a minor, the administration can take years to complete.  That does not mean all of the beneficiaries must wait until the minor turns 18 (or whatever the age specified in the trust) to receive their distribution.  

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