The job of caring for assets after a loved one’s death involves various important and complex duties. This person — known as a trustee — will be responsible for filing income tax returns, communicating with the people who will receive the assets and managing the investments. This guide explores how the trust administration process works and offers a trust administration checklist for people in California to help you get started.
What Is Trust Administration?
Trust administration is the process of managing and preserving the assets within a trust. An individual, known as a grantor, trustor or settlor, can create a trust to preserve their wealth and ensure a particular person, known as a beneficiary, receives it at a specified time.
This specified time may either be while the trustor is living, commonly called a living trust or after the trustor has passed on, commonly known as a testamentary trust. The trustor will generally ask a third party, known as a trustee, to care for these assets until it is time for the beneficiary to receive them.
For instance, you might create a trust when you have particular assets you want your loved ones to have after you die. These assets may include real estate, bank accounts and personal property. If your child or grandchildren are too young to receive it after your death, the trustee will care for these assets until they reach a reasonable age to receive the assets.
Trust Administration Checklist
A trust administration checklist in California has very specific needs because it must comply with California’s laws regarding trusts and estates. Here are some of the critical steps you’ll need to follow during the trust administration process.
1. Gather the Necessary Documentation
A trustee’s first step includes gathering all the necessary documentation. They should obtain the original trust document to understand the trust terms and named assets. They should then also obtain numerous certified copies of the death certificate, which will become useful in sending proof to various institutions and advancing processes. Deeds and other relevant estate planning documents should also be gathered to help map out the different actions you need to take to protect the various assets.
Review these documents and make sure you understand your loved one’s wishes, beneficiary details and assets so that you can secure the assets and ensure their well-being until the beneficiary is eligible to receive them.
2. Issue Notices to Heirs and Beneficiaries
If the trust administration is required because the grantor has passed away, California law requires trustees to notify heirs and beneficiaries within 60 days after the trustor’s passing and issue them a copy of the trust. In the event new heirs or beneficiaries are discovered after that initial 60-day timeframe has passed, trustees have 60 days after becoming aware of their existence to issue notice.
This is necessary so that legal beneficiaries and heirs can review the trust and have a 120-day time period to contest it if needed.
3. Issue Notices to Creditors and Settle Claims
The trustee must inform all known and potential creditors about the decedent’s passing by filing a notice. This gives creditors such as hospitals or mortgage companies an opportunity to submit any claims to settle outstanding debts, bills and liabilities. You’ll then review and address each claim to verify its accuracy and legitimacy before repaying them.
5. File Tax Returns and Pay Taxes
Obtaining a Tax Identification Number (TIN) from the IRS becomes a part of the post-death trust administration checklist when the settlor passes on and their trust becomes a separate tax entity. You will need to use this number to open bank accounts in the name of the trust, file final tax returns, pay any remaining property taxes and advance other essential financial transactions.
6. Prepare Formal Trust Accounting
Trustees may also try to do formal and informal trust accounting on an annual basis. During this process, beneficiaries can review the assets to monitor if the trustee has properly managed and distributed the assets in compliance with California law.
7. Keep Records
Make it a part of your trustee duty checklist to keep all documentation associated with the steps you took during trust administration. This includes notices you issued, responses received and other communication records regarding the trust. This may help you demonstrate your compliance and resolve any potential issues that arise.
8. Distribute Trust Assets
The final step is to distribute the trust assets after you have finished handling obligations, debts and liabilities. There are three types of contributions:
- Outright distributing: This requires simply issuing checks or distributing property after gaining consent.
- Staggered distribution: This is relevant for complex trust administration cases where you’ll need to manage the assets for years before distribution.
- Discretionary distribution: In rare cases, you may make distributions according to your best judgment if the settlor requests this in the trust document.
9. Close the Trust
This step is important to confirm that all assets were distributed and handled correctly. You may start by reviewing the trust document for specific information about closing the trust and ensuring that the trust assets were distributed according to the document. You may then do a final accounting of trust finances, such as distributions, expenses paid and income received.
Make sure to send the final accounting to all beneficiaries to help them understand how assets were distributed and managed and ask them to sign it in acknowledgement. You can then prepare and submit dissolution documents to formally close the trust or end the trust administration process.
Benefits of a Professional Trustee
Trustees often require a basic understanding of California estate and trust laws to help ensure a smooth process. There are also some financial needs associated with the trust, such as taxes and bills. Someone with expertise in the field of trust administration in California can benefit you in various ways.
- Handle situations objectively: While some people may choose to appoint a family member as the trustee of their trust, conversations about assets may cause family members to act from a place of emotion rather than logic. A professional trustee is a neutral party in the discussion of trust assets. These professionals will know to stay ethical and uphold legal standards while handling the management of your assets in an unbiased manner.
- Apply a wider array of skills: A trust administration lawyer may have enhanced wealth-management skills, knowledge about growing and maintaining investments and finance and tax management skills. This may help to ensure financial accuracy and compliance to fulfill all asset obligations.
- Keep liability in mind: Trusts have various legal implications and tax considerations, which prompt you to follow more complex guidelines to avoid errors and liability. Attorneys are well-versed in estate management guidelines and tax laws to help minimize bookkeeping errors, tax liability and asset mismanagement.
Speak With One of Our Trust Administration Attorneys
Choosing a knowledgeable trustee is essential for a smoother trust administration process in California. Our attorneys at Barulich Dugoni Suttmann & Cummins Law Group, Inc. are ready to assist you and your loved ones with our trust administration services. We aim to fulfill all your trust administration needs in controlled stages while following California trust administration estate laws. To gain a better understanding of how we can help you, contact our trust administration attorneys today.
