Trust administration refers to the trustees’ management of trust property according to the trust document’s terms and for the benefit of the beneficiaries after the settlor’s death. Many steps are required to safeguard effective administration. It is recommended to work with an attorney to help facilitate the process for the trustees throughout the process. Typically the court is not involved in the process.
Trust administration starts with mandatory notice to all beneficiaries and the settlors’ heirs. After receiving notice, the beneficiary has a certain amount of days, depending on the jurisdiction, to file a trust contest. If no contest is filed within this time period, the beneficiary may surrender his or her ability to file it.
If the trust holds real property, the next step is to bestow title in the successor trustee to ensure that the property will be handled according to the settlor’s wishes. An affidavit ought to be recorded with a certified copy of the death certificate against each real property held in living trust. This process transfers the property’s title from the deceased settlor to the new trustees. A change of ownership form is typically recorded simultaneously with the affidavit. If the trust transfers real property from parents or children by any means exempt from property tax reassessment, the trustee must complete the proper exemption form. An attorney is recommended to help prepare these documents.
Once the real property has been handled, the trustee will need to ascertain all other trust assets, such as bank and investment accounts, and transfer the title of those assets into the trustee’s name as the successor trustee. The trustee needs to first acquire the trust’s federal tax identification number so that any income earned from the accounts in the name of the trust is correctly reported to the IRS.
The successor trustee is required to pay the settlor’s debts and satisfy his or her liabilities. Taxes can be particularly complicated because both estate and income taxes may be owed if the estate is sufficiently large. To assess whether it is necessary to file a federal estate tax return for the settlor, the trustee needs to calculate the value of the decedent’s estate. If the value exceeds the exemption amount, the trustee must file the federal estate tax return form. It is highly recommended to work with an attorney to determine whether a federal estate tax return is necessary.
California requires that the trustee keep a detailed accounting of the trust. This involves using trust funds to wind up the decedent’s affairs, overseeing all trust activity, including deposits and distributions from the trust, and reviewing the document to determine the appropriate mode of accounting. The trustee should meet with an attorney at the onset of the administration process to assess the extent of his or her accounting obligation.
Once the assets have been collected, the debts paid, the tax returns filed, and the liabilities fulfilled, the trustee should distribute the remaining trust assets. The terms of the trust document will order how the trust assets should be dispersed among the beneficiaries.