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10 Key Steps in Administering a Trust in California

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The timeframe for completing the trust administration process varies depending upon the circumstances of the situation. For example, administering a trust of a married couple when one spouse passes away can be completed in a few months while the settlement of a large trust with multiple beneficiaries and properties can be more complex and take longer to complete. Timing all depends on the responsiveness and efficiency of the estate attorney and the trustee, as well as any complications that arise, such as title problems, tax issues, creditor claims or disputes with beneficiaries. For the trustee, it is important to set a timeline for administering the trust and make a budget for administration costs. The timeline and the expected costs involved should be communicated to the trust beneficiaries as soon as possible. Many trust disputes stem from a lack of communication between the trustees and the beneficiaries.

Here is a brief overview of the steps involved in trust administration:

1. PROVIDE NOTICE A trustee is required by law to give notice of the trust administration to all heirs and beneficiaries. There is a specific legal notice that is required to be used and mailed. Once the notice has been mailed, any party wishing to contest the trust must do so within 120 days of receiving their notice. It is also advisable to notice any creditors of the decedent. The creditor claim period can then begin. Any claims against the trust which are submitted after the creditor claim period do not have to be paid. 2. IDENTIFY TRUST ASSETS A trustee has certain duties and can be held liable if anything should happen to the trust assets. As such, it is particularly important to identify trust assets as soon as possible. The trustee is responsible for ensuring no assets are stolen, lost, or destroyed and can be held liable if assets substantially lose value. 3. PRUDENTLY INVEST TRUST ASSETS While the administration is in progress, the trustee has a fiduciary duty to invest assets in a prudent and reasonable manner. For liquid assets such as stocks and bonds, the trustee should invest in a way that minimizes risk but also earns reasonable returns. Real property that is not being utilized (such as a vacant home) should either be rented or sold within a reasonable amount of time. 4. OBTAIN TITLES Titles of all assets both in the name of the trust and in the name of the decedent should be obtained by the trustee. There are ways of transferring assets not titled in the name of the trust but intended to be in the trust. 5. OBTAIN APPRAISALS The trustee should obtain appraisals/valuations for all trust assets as soon as possible. A very important step for income tax purposes because of cost basis adjustments. Obtaining proper valuations can mean lower taxes due to the elimination of unrealized capital gains. 6. PAY DEBTS The trustee should arrange to pay all valid creditor claims. Failure to pay creditors can result in personal liability for the trustee. 7. FILE TAX RETURNS A trustee has a duty to file all tax returns, including the personal returns of the decedent and any estate tax returns. 8. PREPARE TRUST ACCOUNTING A trustee has a legal duty to prepare a trust accounting, the format of which is set forth in the California Probate Code. 9. PREPARE DISTRIBUTION PLAN Living trusts can be distributed in a variety of ways. Distribution will depend upon the specifics set forth in the trust documents and applicable state law. The trustee's duty is to prepare a plan of distribution that follows the terms of the trust and minimizes expenses. The beneficiaries of the trust may have to be involved in certain situations. 10. DISTRIBUTE TRUST ASSETS The trustee must then distribute the trust assets which may include title transfers, preparations of deeds, money and stock transfers, among other tasks required to settle the trust. If there is any disagreement or confusion during the administration process, it is recommended to consult with a certified trust attorney to ensure that the situation does not escalate out of control. Call David A. Arietta at (925) 472-8000 for a consultation.