Trust Administration. The What, When, How and Why?

Probate has been avoided. Great! But proper Trust Administration is critical to avoid family squabbles.

If a person dies and they have a living trust, then the successor trustee, named in the living trust, must “administer” the trust. The successor trust must follow all of the instructions in the living trust and they must also follow all of the state and federal laws that impact the decedent’s estate. This is called a trust administration.

The process for administering a living trust is similar to a probate in many ways; however, the biggest and most important difference is that a trust administration is a completely private process whereas a probate is a court-supervised process. Despite the absence of court supervision, the successor trustee named in the living trust has certain fiduciary duties or obligations to fulfill.

If these actions are not undertaken, or are handled incorrectly, the successor trustee may be liable for any additional taxes due or may be liable to the trust beneficiaries for mistakes made, even if the successor trustee’s actions were done in good faith. Some of the successor trustee’s actions are mandated by the terms set forth in the trust document; other actions are required under California law or federal tax law. Below is a brief overview of some of the steps required in the administration of a trust and, depending on the situation, size and complexity of the estate, additional steps may be required.

Some of the Tasks To Complete

Under California law, the trustee must file the original Will of the decedent with the clerk in the county where the decedent resided at the time or his or her death, must provide a written notice regarding the trust to all living trust beneficiaries, must inventory all of the assets of the living trust, must file annual accountings with the trust beneficiaries, must provide an accounting upon the termination of the trust, must record an Affidavit of Death for each interest in real property held in the trust, and must ensure that all tax filings are complete, including a trust tax return filed after the death of the decedent. The above is not an exhaustive list of the tasks that may come before the trustee.

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