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Q.What is Trust Administration?
A.Administering a trust after someone dies is actually dare I say just as complicated as probate, but instead of dealing with the Probate Court System, the trustee only has to deal with a trusted attorney. When the settlor (the person who created the trust) dies, the trustee is required to take various steps to comply with state law and the terms of the trust to change title to assets. This process is called "trust administration." The complexity of the trust administration depends on the number and type of assets, their total value, and whether the trust includes any tax planning provisions.
In California, the rules to be followed are set forth in California Probate Code Section 16060, et. seq. The rules for trust administration require:
- Within 30 days of the person's passing, California law requires the original will along with any codicils to the will to be filed with the county clerk in the county where the decedent resided at the time or his or her death.
- Within 30 days of the person's passing, the trustee is required to send each beneficiary under the trust and each heir in the Will a written notice, by mail or personal delivery, of: (1) the person's passing, (2) the name, mailing address and telephone of each trustee, and (3) the address where the trust will be administered. If the trust became all or partially irrevocable as a result of the death the trust beneficiaries must also be notified that they have the right, upon reasonable notice, to receive a copy of the trust and all amendments upon request; and only 120 days to contest the trust. The probate code requires the notice have precise wording , font size, etc. If the notice is not mailed, the beneficiaries may have up to four years to contest the trust.
- Either the Trustee or the attorney representing the trust will need to acquire a tax identification number from the IRS (Form SS-4).
- The trustee will need to inventory each and all of the trust assets and have the appropriate value ascribed to them to determine the net worth of the estate for federal estate tax purposes. Stocks and bonds are valued by taking the average between the low and high value as of the date of death. Mutual funds are valued as of the closing price on the date of death. Businesses owned by the trust (shares of stock, member interests in LLCs, etc.) require a written appraisal by a competent appraiser. Real estate likewise requires a written appraisal by a real estate agent or broker. If the estate is valued at more than $2 million ($3,500,000 in 2009) a federal estate tax return must be filed. Income tax returns also must be filed for the estate and for the decedent.
- The trustee is also burdened with the duty of investing liquid assets (cash, stocks, and bonds) in accordance with the terms of the trust document and the California Uniform Prudent Investors Act, paying all of the trust's bills and debts, ensuring the annual preparation of accountings, retaining records, and arranging for the trust's income tax returns to be prepared and filed.
- To transfer real property held in the trust, the trustee will have to arrange for the preparation of an Affidavit-Death of Trustee which must be recorded with a certified copy of the death certificate for each property in the trust.
Trust Administration Requires Experienced Legal Counsel. This is not a do-it-yourself project. If the Trustee errs, the Trustee can be held personally responsible. Trustees and executors should seek the advice and assistance of a local wills, trusts, and estate attorney.
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