Trust Administration

Living Trust Documents

As Trustee of a trust, you have a duty to administer the trust pursuant to both the trust provisions, and relevant law.

When a trustmaker passes away, several items are put in motion.  While administering a trust estate is significantly easier than administering a probate estate, there are still several steps that must be followed, and laws that must be adhered to.  This article provides a very basic overview of the process.

Generally speaking, when the trustmaker (also called grantor or trustor) of a living trust dies, the trust, or parts of the trust, become irrevocable.  Once that happens, a very specific Notice must be sent to all of the current beneficiaries of the trust which notifies them of the death, the irrevocability of the trust, lets them know they may request a copy of the trust, and also that they have a set period of time within which they can bring an action to contest the trust.

The Trustee must also read and understand the trust instrument, and follow its provisions.  Most trusts call for payment of funeral and administrative costs to be paid from the trust assets first; often times, provisions are made for an interim Administrative Trust.

The Trustee is obligated marshal and inventory the trust assets.  This may require a re-titling of assets or accounts.  Trustees are also required to provide accountings to beneficiaries, detailing the trust’s assets, gains and losses, allocations to principle, annually, as well as at the occurrence of certain events, such as a change of trustee or termination of a trust.

If the trust breaks into subtrusts (as is usually the case with a joint revocable trust upon the death of the first spouse), then the Trustee must appropriately allocate assets to subtrusts.  This entails an understanding of the trust instrument, and often requires an assessment of the character and nature of each asset – this is particularly true in light of the increasing use of “Clayton elections” in joint RLTs.

One of the final steps in trust administration is often distribution of specific gifts.  The Trustee must actually distribute specific trust assets or funds to the appropriate individuals and (for their sake) obtain Receipts and Waivers.

Throughout the process, California Trustees must be cognizant of their “fiduciary duties,” which are set out in detail in California Probate Code section 16000, et seq.  These duties include those set forth above, as well as a duty to administer the trust solely for the benefit of the beneficiaries, to avoid conflicts of interest, to preserve trust assets and make them productive, and to generally administer the trust “with reasonable care, skill, and caution under the circumstances.”

 

 

 


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