Roles & Responsibilities of Successor Trustees

March 26th, 2008

After the death of a loved one as successor trustee you’ll have certain fiduciary duties to fulfill. The process you’ll go through to complete these duties is often referred to as “trust administration.”  Now before you get completely overwhelmed looking at the list below, keep in mind that a good estate planning attorney and CPA should be able to assist you in taking care of the vast majority of these trustee duties and responsibilities. If you need a referral to a good estate planning attorney or CPA who are well versed in these areas, just give me a call and I will point you in the right direction.

That said, below are some of the roles, tasks and legal responsibilities that you may assume in your job as the successor trustee.

  • Filing Of the Original Will: The original will, and any codicils must be filed at the county clerk’s office (in the county where the decedent resided) within 30 days of the decedent’s death.
  • Notifying Trust Beneficiaries and Heirs: Within 60 days of the date of death you are required to notify all trust beneficiaries and heirs in writing.  There are specific guidelines and information that must be included in this notification.  In California, this link California Probate Code Section 16061.7 shows you what must be included on the notification.  The notification to the beneficiaries and heirs spells out that they’re entitled to receive a copy of the trust, and any amendments. Among other things, they must also be advised that they have the right to contest the trust. Once the notice is mailed (it’s best to send these notices certified mail with a return receipt requested) then the party will have only 120 days from the mailing date to contest the trust. (If the notice is not mailed, the beneficiary may have up to 4 years to contest the trust. In addition, there may be potential damages, including attorney fees and costs, if the trustee does not mail the notice and comply with all the legal requirements).
  • Tax Identification number: The successor trustee must also obtain a federal tax identification number (also known as a “employer identification number” or “EIN”). Instead of using your social security number this “federal tax identification number/employer identification number” will be used for all of the trust assests and for tax reporting purposes. Surprisingly, the IRS makes it easy to obtain a federal tax identification number with this link. (http://www.irs.gov/businesses/small/article/0,,id=102767,00.html)
  • Trust Certification / Re-registering assets to the name of the Successor Trustee: The “certification” of a trust is a typed statement listing the current acting trustee(s) of the trust, the tax identification number, the powers of the trustee, and other pertinent information regarding the trust. This certification is used along with a certified copy of the death certificate to re-register the assets of the trust into the name of the successor trustee. After re-registration, all assets should remain in the trust until all taxes, debts, and other expenses are paid and settled. There should be no distributions made to beneficiaries or heirs until all those liabilities are resolved.
  • Obtaining Certified Copies of Death Certificates: As you read through these various tasks you will notice that many times a certified copy of a death certificate will need to be provided. Therefore, it is smart to obtain a dozen or so. To obtain a Certified Copy of a Death Certificate in Marin County you must fill out a death certificate application form, and a sworn statement under the penalty of perjury. If you are mailing in your request, the sworn statement must be notarized otherwise it will be rejected. Here is the application form for Marin County http://www.co.marin.ca.us/depts/AR/main/docs/Deathform.pdf
  • Changing Title to Real Property: For each real estate parcel owned in the trust a real estate form called an “Affidavit-Death Of Trustee” will need to be recorded, along with a certified copy of a the death certificate. This will change the title to the property or properties into the name of the successor trustee.
  • Preliminary Change of Ownership Report: This is another real estate form that should be filed with the Affidavit-Death Of Trustee. This form notifies the county assessor that a change of ownership has occurred and whether the property is subject to a tax reassessment or not. Real property passing to a surviving spouse or to a trust for the spouse’s benefit, or to children of the deceased, or to children of a deceased child, is typically exempt from reassessment. However, transfers to other relatives or to someone who is not related to the deceased may trigger a tax reassessment.
  • Valuation of all Assets: The trustee will need to make an inventory of all the assets in the trust as well as any assets that were owned by the decedent that were not in the trust. The valuations of all assets must be based on the date of death. Valuations for stocks and bonds are typically done by taking the average between the high and low values as per the date of death. Mutual funds take the closing price on the date of death. Real estate is valued by a written appraisal from a qualified real estate appraiser (call me if you need a referral for a good local certified real estate appraiser). Other assets needing valuation would include; IRA accounts, 401K plans, life insurance, artwork, antiques, etc.. Most automobiles are valued using the Kelly Blue Book, visit their website at http://www.kbb.com/
  • Notice to Creditors: California law has a special provision allowing a notice to creditors to be filed for a living trust similar to that used in probate proceedings. The trustee needs to file the notice with the county clerk and a publication of the notice must appear in the local newspaper three times. Any known creditors of the deceased must also me mailed a special notice. These creditors then have up to four months to file a claim against the trust, with some exceptions. If these procedures are followed and the creditor does not make a claim against the trust, the creditor will typically lose their right to any payment. Even though this notice procedure is not a legal requirement of the trustee, it is a prudent step. If the notice procedure is not used the creditors could have a period of up to four years to seek payment and the trustee could be personally liable for the debt.
  • Filing Tax Returns: As successor trustee, you are responsible for filing the last income tax returns for the decedent. In addition, you will need to file a federal estate tax return within nine months of the date of death if the total gross value of all the assets owned by the deceased, both inside and outside the trust, exceed a certain value (the value limits change from year to year so please consult with an estate planning attorney and a qualified accountant to advise you on your particular situation).
  • Probate of Assets Outside the Trust: Assets in a living trust will typically avoid probate. However, probate may be required if there are too many assets held outside the living trust. If the assests outside the trust exceed $100,000 in value – (as of the date of death) California law requires a probate hearing. Keep in mind that $100,000 figure above does not include assets held in joint tenancy, any assets where a specific beneficiary is named such as a life insurance policy or IRA, or any vehicles.

As the successor trustee you will have other “fiduciary” duties (“fiduciary” meaning you must always act in the best interest of the trust – - not yourself). Some of these fiduciary responsibilities would include:

  • You must follow the instructions outlined in the trust document.
  • You cannot use trust assets for your own benefit (unless specifically authorized in the trust).
  • You cannot mix trust assets with your own. Make sure you keep your individual accounts separate from the trust checking accounts and investments.
  • All trust beneficiaries must be treated the same; you must not favor one beneficiary over another.
  • All trust assets must be invested conservatively with minimal risk to protect the trust assets.
  • You must keep detailed accounting records for all trust related activities.

In the process of administering the trust you may also find yourself doing the following:

  • Helping with Funeral Service Arrangements.
  • Meeting with various professionals (attorney, cpa, real estate agent, appraisers, etc.).

I know this list may seem overwhelming, especially when you are mourning the loss of your loved one. Don’t worry … You’ll have time to accomplish your tasks (some of which can be delegated to others) and having the right professionals to guide you through the process will be make things much easier on you. Helping successor trustees with their real estate needs while saving them lots of time, money, and headaches in the process is our specialty. Check out our Trustee Assistance Program to see how we make things easier for you.

It is important to understand that I am not an attorney, or a CPA and the contents of this entire website should not be construed or relied upon as being legal or tax advice. The steps involved with administering your trust may vary depending upon the complexity of the trust, how it was written, and other local requirements or conditions. I highly recommend that you consult with the attorney who prepared the trust, or another attorney who is well versed in these matters, and a qualified tax advisor so that they can best advise you on your particular situation and course of action. As I mentioned above, a good estate planning attorney and CPA should be able to assist you in taking care of many of the responsibilities mentioned above. Call me if you need a referral to a great estate planning attorney or CPA.

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