What is Trust Administration?
When a loved one passes away and has a living trust, the estate does not automatically distribute itself. The trust must go through a legal process known as trust administration, where the designated successor trustee steps in to manage and distribute assets according to the trust’s terms. Unlike probate, which involves court oversight, trust administration is typically a private process—but it still requires careful attention to legal and financial responsibilities.
If you are named as a successor trustee, it’s important to understand your duties and the steps involved in administering a trust in California.
1. Understanding the Role of a Trustee
A trustee has a fiduciary duty to manage the trust’s assets responsibly and act in the best interests of the beneficiaries. This includes handling financial matters, following legal requirements, and ensuring assets are distributed according to the trust document.
2. Key Steps in Trust Administration
Step 1: Review the Trust Document
The trustee must carefully read the trust to understand its terms, including who the beneficiaries are, how assets should be distributed, and any specific instructions left by the deceased (grantor).
Step 2: Notify Beneficiaries & Heirs
Under California law, trustees must send a formal notice to all trust beneficiaries and heirs within 60 days of the trustor’s passing. This gives them the opportunity to review the trust and contest it if necessary.
Step 3: Obtain a Tax Identification Number
Once the trustor has passed, the trust becomes an irrevocable trust and requires a new Tax Identification Number (TIN) from the IRS. This allows the trustee to handle financial matters such as filing tax returns and distributing assets.
Step 4: Gather and Inventory Assets
The trustee is responsible for identifying, securing, and valuing all trust assets, including:
Bank accounts
Real estate
Investments
Business interests
Personal property
If the trust includes real property, the trustee must change the title into their name as trustee and may need to prepare new deeds for the beneficiaries.
Step 5: Settle Debts and Taxes
Before distributing assets, the trustee must:
Notify creditors and pay outstanding debts.
File the deceased’s final income tax return and any required estate tax returns.
Pay any estate administration expenses from the trust assets.
Step 6: Distribute Assets to Beneficiaries
Once debts and taxes are settled, the trustee distributes the remaining assets to the beneficiaries as outlined in the trust. Some trusts provide for immediate distributions, while others may have staggered distributions (e.g., when a beneficiary reaches a certain age).
Step 7: Keep Records & Provide an Accounting
California law requires trustees to keep detailed records of all financial transactions related to the trust. In many cases, trustees must provide a formal trust accounting to beneficiaries.
How an Attorney Can Help
Trust administration can be complicated and time-consuming, especially for trustees unfamiliar with the legal and tax responsibilities involved. An experienced trust administration attorney can:
Guide you through legal notice and tax filing requirements.
Assist with property transfers and real estate deeds.
Help prepare trust accountings for beneficiaries.
Ensure proper and fair asset distribution.
If you’ve been named a trustee and need guidance, we’re here to help. Contact us today for a consultation to ensure a smooth and legally compliant trust administration process.
