9 Steps to Take to Administer a Trust

As a new trustee, you probably have a lot of questions about what to do first. Below are 9 steps to take in administering the trust you are now responsible for.

If the trust was set up with your spouse or registered domestic partner, when the first person passes, usually all that is required is to file an “Affidavit of Death of Trustee” with every county in which property is held. The reason you do this is to put the world on notice that a prior signer of a deed has passed away and can no longer sign for themselves. If the remaining spouse wishes to sell the home or a property, they can now sign by themselves. The explanation for why the other person can’t sign is in the “Affidavit of Death of Trustee.”

When the Original Settlors/Trustees Pass Away

If you are the new trustee of a revocable living trust, there are many things that you may have to do in order to carry out trust administration properly. (SETTLORS= the people who “set up” the trust. When that person has passed, or when both people have passed, the SUCCESSOR TRUSTEE steps into their shoes to follow their instructions and manage their assets.)

1.)       Know that the trust is now irrevocable. This means you cannot change the terms of the trust. At all. (Unless you petition the court. And now you are in court…the very thing the original trustees wanted to avoid. Sometimes you can’t help it, especially if the trust was a bad one to start with. Just know you can’t go into the trust and decide to change beneficiaries or shares they receive on your own.)

Having said that, you need to read the trust. If there is something you do not understand, it would be wise to consult with an attorney. You do NOT have to consult with the same attorney who drafted the trust. If they send you a letter telling them that you do…they aren’t being honest. Of course, you CAN use the same attorney, especially if you like them and trust them.

2.)       Send California Probate Code 16061.7 NOTICE to all heirs at law and everybody named in the trust.

3.)       You will need to lodge the will with the probate court. This is not a difficult process. A proper estate plan will have a “pour over” will. Take it to the court and lodge it.

4.)        Gather asset information and prepare an inventory.

5.)        You will need to get a EIN/TIN from the IRS. You can do this online. Now that the original trustees have passed, the trust needs a government ID number. This number will allow you to open a bank account for the trust…and if there is already a trust bank account, the bank will want this new number.

6.)       Related to above: you will have to file a 1041 Federal Tax return. This is the income tax return for the estate…if the estate makes $600 or more, you must file this return.  IRS INFO HERE 

The estate tax threshold is fairly high, and only those estates worth $5.49million+ for each individual will need to pay. (You still need to file even if you don’t owe. Talk to your favorite CPA about this. This is separate from “income” taxes.)

7.)        Also related to #5: open up a trust bank account. This is where cash and proceeds need to go. This makes it easy to account to the beneficiaries (via bank statements), make deposits, and also make distributions.

 8.)       Deal with creditors: gather creditor information and prepare a list for notice. Open probate Court file to accept creditor claims. Publish in local newspaper to notify potential creditors. Send notice to potential creditors including Medi-Cal (the Department of Health Services).

9.) File an “Affidavit of Death of Trustee” with every county that the Settlor owned property. This puts everyone on notice that that person can no longer sign future deeds. A Change of Ownership report also needs to be filed with your county assessor’s office. SAMPLE AFFIDAVIT OF DEATH HERE

Is there anything else?

Although there are numerous steps in administering a trust, it is far easier and more cost efficient than having to go through the probate process. Your particular situation might require more steps than the introductory ones listed above. If you are unsure about your situation, please call an attorney who regularly works in trust administration to guide you through the process.

A well prepared estate plan will help the successor trustee in their duties as they take over the trust. If you are a new trustee, you may want to consult an attorney on the right path to take for your situation. If you are looking for an estate planning attorney, find one that will keep your loved ones in mind as the end result of the process. After all, your trust is meant to help your family, not make things more complicated in a time of grief.