What is Trust Administration?
Trust Administration is what happens after a creator, i.e. Settlor/Grantor, of a Trust passes away. Once the Settlor or both Settlors of a Trust pass away then a Successor Trustee of the Trust will be appointed. Their main goal will be to gather the assets in order to distribute them to beneficiaries named in the Trust as specified.
What is a Trust?
A Trust is a document that states the intent or one or two persons, most likely spouses, regarding the disposition of their assets. During their lifetime they are settlors, trustees and beneficiaries. When you create a Trust you often re-title certain assets so that they become part of the Trust Estate to avoid probate.
What is a Trustee?
A Trustee is an individual that created a Trust or is named in a Trust to manage the assets of the Trust Estate. During the lifetime of the Settlor/Trustee, they are managing the Trust Assets for their benefit. The Settlor lists in the Trust who will be the Trustee after they pass away and these are the Successor Trustees. If there are no Successor Trustees named then you will need to read the Trust to determine if the Trustee must be appointed by a court of law, vote of majority beneficiaries, etc.
What Duties Does a Trustee Have?
The Trustee is responsible to the beneficiaries of the Trust and has fiduciary duties, including the duty of loyalty and care. Once the Trust has become irrevocable then there are certain tasks that you must complete. If you are a Successor Trustee and are going to take an action your first question should be, “is this in the best interests of the Trust and the beneficiaries?” Generally, the Probate Code says that the duties of the trustees are the following:
- Written Acceptance of Trusteeship and/or Certification of Trust;
- Notice to beneficiaries and heirs;
- Notice to known creditors;
- Notice to Assessor’s Office;
- Notices to Victim Compensation Board and Director of Health Services;
- Inventory and determine value of assets;
- Follow Trust instructions;
- Attend to Tax Issues;
- Not to use trust property or the powers of the trustee for personal benefit, unless the trust authorizes it;
- Do what the Trust says unless it is illegal, etc.;
- Do what is in the best interests of the beneficiaries;
- Avoid conflicts of interests;
- Do not commingle Trust property with personal property, etc.;
- Administer and invest the assets of the Trust with care and skill to protect the Trust assets for the benefit of the beneficiaries, unless the Trust states that the trustee does not have to invest;
- Diversify investments unless stated otherwise or would not benefit the Trust assets;
- Keep detailed records;
- Make proper determinations of what is income versus principal when the trust directs that they be distributed differently as required by California Probate Code Sections 16220 -16375; and
- Give an accounting to the beneficiaries as required by the Probate Code.
- See the Trustees Duties in General in the California Probate Code for further reading.
What if They Did Not Have a Trust?
If someone passes away without a Trust then I would ask if there was a Will. If there was no Trust but there was a Will then there will be a probate required. If you have questions about probate, then please contact us. If there was no Will a probate process is mostly likely required but the property will pass according to the California Probate Code. If there was a Will then the Judge will look to the Will to distribute all property, trying to adhere to the intent of the person that created the Will. However, if there was no Will the Judge will look to the Probate Code to determine how the property shall be distributed.
What if I Cannot Find the Trust?
Occasionally, people contact me and state that they cannot find the Trust. My first question is, “do you know who created the Trust?” If you know who created the Trust then contact the law office. Attorneys are required to keep records and most likely have a copy of the Trust. Once they contact the Attorney and I have a copy of the Trust then I can start the Trust Administration process.
Generally, once you start going through the house it is likely that you will find the Trust of the Will. Also, it is important to ask your Aunts, Siblings and other friends that were close to your parents if you believe that they might have discussed the Trust with them.
If you knew that a Trust was created but it still cannot be found I can try to prove existence of the Trust in other ways. Please contact me with questions.
What if I am a Beneficiary and not the Successor Trustee?
As a beneficiary of a Trust you have rights. Your rights may have not vested but if they have you are entitled to Notice of the Trust according to California Probate Code Section 16061.7, which states,
“(a) A trustee shall serve a notification by the trustee as described in this section in the following events: (1) When a revocable trust or any portion thereof becomes irrevocable because of the death of one or more of the settlors of the trust, or because, by the express terms of the trust, the trust becomes irrevocable within one year of the death of a settlor because of a contingency related to the death of one or more of the settlors of the trust.”
Additionally, you are entitled to an annual Accounting of the Trust Assets unless stated otherwise in the Trust. If you are a beneficiary of a trust and have questions, please contact our office.
How do I know Who is the Successor Trustee?
The Trust document should state who is named as Successor Trustee of the Trust but if it does not it should name a process to nominate another Successor Trustee.
What if Property or an Asset Was Left Out of the Trust?
Unfortunately, this is more common then it should be. If property was left out of the Trust, depending on the value then I will either draft a Probate Code Section 13100 Affidavit or a file a Heggstad Petition with the Court. Both documents are an attempt to avoid probate when property was left out of a Trust.
If you refinance the mortgage on your home or rental then your bank is not going to record the new deed in the title of the Trust in a majority of the cases. Please contact me if you have refinanced and need to confirm that your deed is in Trust title.
What is a Probate Code Section 13100 Affidavit?
If you have the legal right to inherit assets, like money in a bank account or stocks, and the entire estate is worth $150,000.00 or less, you may not have to go to court under California Probate Code 13100. There is a simplified process you can use to transfer the property to your name that may not require probate. But this process is not for real property, like a house. If there is a house in addition to the bank accounts then a probate process may be required. If you have additional questions, please contact us.
What is a Heggstad Petition?
A Heggstad Petition refers to a California case, the Estate of Heggstad, (1993) 16 Cal. App. 4th 943, where the Court held that the settlor’s, i.e. the creator of the Trust’s, written declaration that the assets were held in trust was sufficient to create a Trust and that property was held to be an asset of the trust and not subject to disposition through the decedent’s Will. Generally, the process takes longer than a standard Trust Administration because there are court appearances.
What if the Trustee is Incapacitated?
Generally, when a Trustee becomes incapacitated as determined by a doctor it is time to resign as Trustee of the Trust. Signs of this could be that they cannot pay their bills, having trouble driving, etc. but the doctor will be the best person to determine capacity. Once they resign then a Successor Trustee will be managing the assets for the benefit of the Trustee that resigns unless they are not a beneficiary of the Trust.
If someone is incapacitated and they did not have a Trust then it might be too late to create a Trust. They might need a conservatorship of the estate or person.