Estate Planning

Trust Admin Process in a Nutshell.

By Administrator

The Trust Administration process after the settlor or settlors have died is usually thought of in four phases. This is assuming that for a single person trust that the person who created the Trust, the settlor, has died. This is also assuming that for a two person trust that both persons who created the Trust, the settlors, have died.

Below is a nutshell version of what the phases look like for California trust administration.

The first phase is intake. During the intake process the attorney handling the trust administration will discuss generally the following:

-- Review of the dispositive provisions of the Trust
-- A conversation about the family members, whether any one has been disinherited or if there will be any other potential problems with family members
-- Discussion of any potential problems immediately known
-- Discussion of the roles of the successor trustee(s)
-- Discussion of the scope of work by the attorney and signing an engagement agreement

If you have decided to hire the attorney, the attorney will assist you with second phase. The second phase is about getting the successor trustee in place and take possession of Trust assets. For real property, an Affidavit of Death of Trustee will be prepared, signed and recorded with the appropriate county recorder offices where the Trust owned real property. This clears title to the real estate so the sucessor trustee can manage the property. It will also include preparing and serving by mail a Trust Notification according to California Probate Code Section 16061.7 (which is very important to start and stop the claims cutoff period to contest the Trust).  A certification of trust will also be prepared to assist you with marshaling other assets like bank accounts. A federal tax identification number will also be obtained if needed.

If there are assets out there that are not in the Trust, you may have to resort to other legal procedures to get these assets into the Trust or otherwise handled. Some legal procedures could include a Probate Code Section 13100 Affidavit, Probate or even a Heggstad Petition. All of these are very fact dependent and depend on the nature of the asset, the Trust itself and other related facts like if there is a Schedule A or other evidence. Your attorney will assist you with the determination of the best legal procedure to gather non-Trust assets and how to get them vested in the Trust should that be the goal.

The third phase is about marshaling assets. This means identifying all assets, obtain date of death valuations where needed especially for tax purposes, obtaining current valuations where needed, and get an accountant on board to determine what tax returns are required. Federal estate tax returns (aka 706 returns named after the tax form number) are due within 9 months of date of death. If there are small cash gifts to be made in accordance with the Trust, then a preliminary distribution could be made.

Once all of the assets are identified, marshaled, valued and all tax returns have been filed (for the decedent, for the estate, for the trust and federal estate tax returns) then the trust is likely in a position to be terminated and all Trust assets distributed according to the Trust terms. This is the fourth phase. A trust distribution agreement is prepared and sent to the beneficiaries for review and signatures. And once everyone has agreed to how the Trust assets will be distributed, the trustee makes the final distributions. There may be resulting concerns like filing a final fiduciary tax return on behalf of the Trust even after the Trust has been terminated.

Trust administration is almost always easier than probate as court oversight and approval is not usually necessary. But, it is one of those things that is best done with the assistance and advice of counsel. So, as this blog always says, be sure to consult with your own attorney regarding trust administration.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Full post as published by Estate Planning Practice Blog on March 26, 2009 (boomark / email).