How to Administer a Trust in California

If you’re a trustee, it’s your responsibility to manage a trust when the settlor dies. If you’ve never worked with a trust before, this responsibility may seem overwhelming. Every trust is different, and the time it takes to complete the task will depend on its size, complexity, and whether any issues (e.g. involving taxes or titles) arise during the administration. However, there are a few basics that all trustees are obligated to observe.

No matter what the nature of the trust is, it’s always a good idea to turn to an estate planning attorney who can help you with the trust administration work. Loew Law Group, PLC, is here to help, and we bring our considerable experience and skill to every trust and estate matter.

Understanding a California Trust

A trust is created by a settlor (or trustor) to manage assets efficiently and confidentially for the benefit of others, namely, the beneficiaries. Property can be placed into the trust, which is then managed by the trustee. The role of the trustee is to carry out the settlor’s instructions for the benefit of the beneficiaries, which requires at least a few basic steps.

The Basics of Trust Administration

Following the death of the settlor, your role as a trustee will be to do at least the following, in addition to other requirements as set forth in the trust:

Gather essential documents. Before you get started, get everything together – primarily copies of the death certificate, certified copies of the death certificate from the coroner’s office, and the trust document itself. The trust, along with any other estate plan documents, will likely be found among the settlor’s personal papers. Read and familiarize yourself with these documents.

Provide notice to beneficiaries. California law requires that notice of the trust administration be given to heirs and beneficiaries of the trust. Specific language must be used to ensure the notice is legally sufficient. One purpose of the notice is to allow anyone wishing to do so to contest the trust. It’s probably also a good idea to provide notice to creditors so their claim period can begin to run. Working with a trusts and estates attorney, you can ensure that you provide satisfactory notice to all parties who need it.

Identify and value assets. One of the trustee’s responsibilities is to protect and preserve trust assets, ensuring that none are lost, stolen or depleted. If the trustee fails to do this, he or she can be held liable. As soon as the settlor is deceased, the trust property should be identified and evaluated through professional appraisal.

Identify debts. If the decedent had any debts or liabilities (including income taxes), they should be identified. Valid claims made against the estate by creditors and others must be paid. Failure to do so may result in personal liability for the trustee.

Responsibly invest trust assets. All trust assets must be managed in a prudent and reasonable manner. Any real property, such as a vacant home, should be rented or sold. Liquid funds need to be invested in relatively low-risk ways that provide reasonable returns.

Obtain titles. The trustee needs to obtain titles to trust assets (that is, assets titled in the name of the trust).

Timely file appropriate tax documents. This is one step that can be fraught with mistakes. The trustee is required to file any necessary tax documents, and to do so on time. Failure to do so could result in unnecessary tax liabilities for the trust.

Maintain proper trust accounting. Beneficiaries are entitled to have a complete accounting of all transactions. California’s Probate Code sets forth certain requirements for this accounting.

Distribute trust assets. The trustee is responsible for efficiently distributing trusts to beneficiaries in accordance with the trust’s terms and conditions, and with state law. There will likely be certain attendant obligations such as transferring titles. Some assets may stay in the trust for years, with benefits to be paid out over that time. The trustee’s responsibility, in that case, will be ongoing.

Delegate duties as necessary. You are not required to be an expert with respect to all duties imposed by the trust. You may need to turn to those with experience in accounting, investing, real estate, and other fields. Barring no contrary provisions in the trust, this is acceptable. But remember, you are ultimately responsible for overseeing anyone to whom you delegate these roles.

Dissolve the trust. Once all assets are distributed to beneficiaries in accordance with the trust, it should be dissolved. This will terminate the trust as a legal entity.

Why You Need a Trust Attorney

Each of the above steps requires diligence and a careful understanding of the trustee’s duties. The trustee cannot afford to make mistakes. Failure to pay taxes may result in late fees and penalties, which deplete trust resources. Not providing proper accounting may raise a beneficiary’s suspicion. Failure to pay debts could mean that you are on the hook for them.

Any mistake may cause a beneficiary to accuse you of mismanaging the trust. This, in turn, could result in a lawsuit against you. If a beneficiary has reason to suspect you have improperly administered the trust, it will be up to you to defend your actions. There are too many possible landmines to take your role as a trustee lightly.

That’s where an experienced trusts and estates attorney comes in. We can help you carry out your duties and ensure that all obligations of the trust and of state law are met.

Contact Our San Mateo Office Today

The best time to retain an attorney is as soon as your role as a trustee begins. Loew Law Group, PLC, understands the challenges of administering a trust, and we are ready to serve you. Give us a call today to schedule a consultation or fill out the form on our website.