Trust Administration

When a living trust is present, the person or persons named in the trust as the trustee, has fiduciary responsibilities to make certain that the provisions of the trust are met.  If the trustee does not carry out his or her responsibilities or handles them improperly, the trustee may be accountable for any taxes due or other mistakes made during settlement of the trust.   The trustee’s responsibilities are mandated by the trust and by California or Federal laws.

The process that occurs when a settlor (the person who created the trust) dies is called trust administration.

Trust administration steps:

• The original will must be filed within 30 days of the date of death.  A copy of the will must be presented to the executor named in the will.
• All Heirs and Beneficiaries are to be notified within 60 days of death
• Assets at time of death must be inventoried and assessed at fair market value
• The trustee must invest funds based on the terms outlined in the Trust and by the California Uniform Prudent Investors Act.
• The trustee must also keep good records and file annual trust income tax returns.  The trust is assigned a Federal Tax ID number for tax and identification purposes.
• The trustee must retitle assets into the trustee’s name.  With respect to real estate, this may require the recording an Affidavit of Death of Trustee and filing reports with the local County tax assessor.
• Beginning in 2011, a Federal Estate Tax Return is required if a descendant’s assets exceed a specified amount.

Generally, any assets held in a living trust avoid probate. However, in some cases, a descendent Sometimes a person dies while holding assets titled outside of the trust. Such assets must be probated unless the aggregate value of all such outside assets is less than $100,000.that may not be included in the living trust.   Any such assets may require Probate.

As you can see, there are many complex legal requirements for a trustee once a trust becomes irrevocable.   Failure to meet these requirements and obligations can result in costly litigation and potential responsibility for the trustee. It is extremely important to seek the guidance of an experienced San Diego trust administration attorney who understands the requirements of California state law and federal tax law.