Representing Successor Trustees of a Trust

The most common estate planning tool is a revocable living trust that transfers assets at death to designated beneficiaries. “Revocable” means that it can be changed or revoked.  “Living” means that it was created while the settlor was still living.

A trust involves three parties: a trustor/settlor who creates and funds the trust, a trustee who holds title to property and manages the trust, and a beneficiary who is the beneficial owner of the trust assets. It is common for the settlor, trustee and beneficiary to all be the same person when the trust is first created.

When the trustee dies or becomes incapacitated, the successor trustee must perform fudiciary duties of trust administration.  Most successor trustees are unprepared to take over the fiduciary duties because they lack the knowledge and experience to properly administer the trust.  That’s when successor trustees hire an attorney to represent them in their capacity as successor trustee.

Checklist for Trust Administration:

  1. Gather all estate planning documents, such as wills, codicils, trust instruments, amendments and restatements of trust, trust schedules and asset lists, deeds to trust properties, tax returns, etc.
  2. Gather the name, address, telephone number, and email address of each heir and beneficiary.
  3. Hire an attorney to represent the successor trustee in proper trust administration.  The successor trustee can use the trust’s funds to pay for legal representation.
  4. Hire an investment manager if the trust assets value and type require it.
  5. Take a complete inventory of the trust assets and determine their value.
  6. Obtain a taxpayer identification number for the trust from the IRS.
  7. Open bank accounts and other financial institution accounts for the trust.
  8. Marshall assets of the trust by transferring property to the name of the successor trustee of the trust.  This can involve affidavits, and perhaps even probate proceedings depending on the title of assets.
  9. Establish an accounting and record keeping system for the trust.  Keep receipts and invoices of payments with a description of their purpose.
  10. Send notification by trustee under Probate Code § 16061.7 to the heirs and beneficiaries of the trust.
  11. Send notice to creditors and pay creditor’s claims.
  12. Create and fund subtrusts if required by the terms of the trust.
  13. File a final income tax returns for the decedent: Form 1040 with the IRS and Form 540 with the California Franchise Tax Board.
  14. File an income return for the trust, if required: Form 1041 with the IRS and Form 541 with the California Franchise Tax Board.
  15. File an estate tax return, if required: Form 706 with the IRS.
  16. File Change of Ownership forms, Parent-Child Exclusion or Grandparent-Grandchild Exclusion with the County Assessor for each parcel of real estate.
  17. Send notice to Medi-Cal and the Social Security Administration.
  18. Prepare an accounting of all assets, debts, income, and expenses of the trust to all beneficiaries, or have them waive an accounting.
  19. Distribute assets to the beneficiaries according to the terms of the trust.
  20. Gather receipts and Form W-9 from each beneficiary.
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