The California Trust Administration Process - Werner Law Firm
The California Trust Administration Process - Werner Law Firm

The California Trust Administration Process

When a person dies, their assets must be distributed among their relatives or persons of their choosing. Accounts, real property, and even sentimental items may be bequeathed to individuals, groups, or organizations. An estate plan can help a decedent’s loved ones (and the appropriate probate court) determine who gets what after death.

Estate plans often include a will – but depending on the nature and size of the estate, other estate planning documents and tools, such as trusts, may also be used. Without the proper paperwork, the order of bequeathment is usually decided by kinship as per state-specific intestate laws.

This means your belongings would be automatically distributed to your relatives, in a specific order. However, even when all the proper paperwork is in place, there is still a need for the human element of administration. That is where the California trust administration process begins.

The California Trust Administration Process Explained

When a person dies and leaves behind an estate plan that includes one or more trusts, it falls upon the person’s successor trustee(s) to begin the trust administration process. This process aims to successfully manage and eventually distribute the assets held within the trust as per the trustor/grantor’s wishes and instructions.

In the state of California, trustees have specific deadlines for filing notices required to kickstart the trust administration process. In general, their timeline and overall to-do list will look a little like this:

      • Locate the trust and other relevant estate planning documents.
      • Kickstart the probate process (if the trustee is also the decedent’s executor).
      • Notify the trust’s beneficiaries and the grantor’s heirs.
      • Notify relevant creditors.
      • Transfer ownership of real property.
      • Deal with tax considerations for the trust (and estate).
      • Settle debts and liabilities.
      • Distribute the trust’s remaining assets as per the grantor’s wishes.

The proper administration of a trust can be very complicated and can involve a series of clerical and accounting tasks that are quite demanding. An estate planning professional can help you identify your priorities, clear up inconsistencies, answer complicated tax and legal questions, and much more.

Find the Trust Document and Relevant Information

If you have been named a friend or loved one’s trustee, your priority would be to gather the relevant paperwork to begin the California trust administration process. Aside from the trust document itself, you would need its asset list or relevant schedules, as well as the respective deeds for the real properties funded into the trust.

To explain, it is important to remember that trust is effectively a three-way agreement between a grantor or settlor, their trustee, and a recipient beneficiary. When the terms of the trust are concluded or fulfilled, its contents are transferred to the beneficiary as requested.

However, in the interim, anything added to trust is held by the trust. As such, the property must be funded into the trust for it to be a part. A house placed in a living trust must be retitled to the trust’s name rather than the grantor’s name. These documents are important as well.

Beware Your Deadlines

Trustees need to be aware of several deadlines when setting up a timeline for the California trust administration process:

      1. The first and most immediate deadline is that for the probate process, which must be started within 30 days of the date of death. However, this deadline is only relevant for the grantor’s named executor or some immediate family member responsible for other post-death administrative tasks. The probate process is separate from the trust administration process, and anything funded into a trust is typically excluded from probate.
      2. The next deadline is for the written notices that must be sent out to beneficiaries of the trust. The trustee has 60 days from the grantor’s death to send these notices out. This notice, also known as the 16061.7 Notice, gives beneficiaries (and the grantor’s heirs) the chance to contest the trust. Recipients have another 60 days from the receiving date to contest the trust.
      3. The trustee (or the grantor’s executor) will have to file a Medi-Cal Notice of Death with the Director of the Department of Health Care Services within 90 days of the date of death.
      4. The trustee also has 150 days after the death date to file a Notice of Death of Real Property Owner to complete the Change in Ownership for each real property, with a certified copy of the death certificate. Because of this step, real property is usually a top priority for the trust administration process once the trustee begins assessing and managing assets. An attorney’s services are usually recommended for this step, as multiple affidavits may be necessary.

Create and Manage Trust Asset Inventory

After real property, the next step is evaluating the trust’s total value at the date of death, assessing and taking stock of all assets, managing trust income, and the relevant tax issues. A crucial part of this step in the process is the procurement of the trust’s tax identification number.

This is necessary to ensure that any income earned by the trust is correctly reported to the IRS. To determine whether a federal income tax return would have to be filed in the trust’s name, it’s important to assess its total value and earnings accurately. If the decedent’s estate is large enough, it may also owe estate taxes.

Settle Debts and Liabilities

Aside from taxes, the trustee is also responsible for settling the grantor’s other debts and liabilities, if any remain. All deposits and distributions to and from the trust and trust income must be meticulously tracked and recorded.

A trust fund may be set up to bankroll these administrative tasks, and meeting with an attorney at the beginning of the California trust administration process to assess the scope of the trustee’s accounting responsibilities can be helpful.

Trusts can be more than just a simple interim between the decedent and their beneficiaries. Some trusts are designed for a more complicated purpose. The trustee needs to understand their fiduciary duty to the grantor and the trust’s beneficiaries and fulfill their wishes.

Distribute Trust Assets

The last step in the administration process is the most obvious – all remaining assets must be distributed as per the trust. This process can differ from trust to trust.

Consider Professional Legal Help

Correctly managing and administering a trust requires penny-accurate accounting, a keen eye for legal detail, and knowledge of state-specific family law. The bigger the trust, the bigger the worry, and the bigger the administration’s cost and effort.

If you want to ensure that you are not liable for the legal repercussions of a simple clerical error, or something much worse, it may be in your best interest to hire an attorney to help.

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