Trust Administration Checklist

When a loved one passes away, the responsibility of managing their estate often falls on a designated trustee. If you have been named a successor trustee, you are tasked with winding up the financial affairs of the trust and distributing its assets according to the instructions left behind.

Trust administration in California is a precise, structured legal process. While it does not require oversight from a probate court, a trustee must still follow specific statutory timelines and duties. This checklist provides a step-by-step roadmap to help you navigate the process efficiently.

Step 1: Immediate Steps and Document Gathering

The initial weeks following a death focus on gathering information and securing the trust assets.

• Obtain certified copies of the death certificate: You will typically need five to ten certified copies to satisfy banks, financial institutions, and government agencies.
• Locate the original estate planning documents: Find the original trust agreement, any amendments, and the pour-over will. Review these documents carefully to understand the distribution rules and verify that you are the properly designated successor trustee.
• Secure physical property: Take immediate steps to protect real estate, vehicles, and personal property. Ensure real estate remains locked, insured, and maintained.

Step 2: Formal Legal Notices and Disclosures

California law imposes strict notice requirements on successor trustees. Failing to provide these notices can expose you to personal liability.

• Serve the notice to beneficiaries and heirs: Under California Probate Code Section 16061.7, you must serve a formal notice to all trust beneficiaries and legal heirs within 60 days of the settlor’s death. This notice triggers a strict 120-day statute of limitations for anyone wishing to contest the trust.
• Notify the county assessor: If the trust owns real estate in Sonoma County, you must file a Change of Ownership Statement — Death of Real Property Owner form with the Sonoma County Assessor within 150 days of the death.
• Notify Department of Health Care Services: If the deceased person was over the age of 55, you must send a notice along with a copy of the death certificate to Director of Health Care Services within 90 days to determine if there are any Medi-Cal estate recovery claims.

Step 3: Inventory and Asset Valuation

Before any assets can be distributed, you must establish a comprehensive inventory of what the trust owns and determine its value as of the date of death.

• Identify trust assets: Review bank statements, deeds, tax returns, and digital footprints to locate all assets held in the name of the trust.
• Obtain date-of-death appraisals: Hire independent, professional appraisers to value real estate, businesses, jewelry, and art. For bank accounts and publicly traded stocks, obtain statements showing the exact balance or value on the date of death. This step is critical for establishing a new tax basis for the beneficiaries.
• Separate non-trust assets: Identify assets that pass outside of the trust, such as accounts with designated transfer-on-death beneficiaries, life insurance policies, or individual retirement accounts.

Step 4: Manage Debts, Expenses, and Taxes

As trustee, you are responsible for paying the valid debts of the deceased and managing the tax obligations of the trust.

• Apply for a Federal Employer Identification Number: Upon the creator’s death, a revocable living trust becomes irrevocable and requires its own taxpayer identification number (EIN) from the IRS for banking and tax reporting purposes.
• Open a trust bank account: Establish a new checking account using the trust EIN. All income earned by the trust should be deposited here, and all trust expenses should be paid from this account. Do not mix personal funds with trust funds.
• Pay valid creditors: Review the decedent’s mail and bills to identify outstanding debts, such as mortgages, utilities, medical bills, and funeral expenses. Pay valid claims from the trust bank account.
• File tax returns: Arrange for the preparation of the decedent’s final individual income tax returns (Form 1040) and the fiduciary income tax returns (Form 1041) for any income generated by the trust after death.

Step 5: Accounting and Final Distribution

The final stage of administration involves reporting to the beneficiaries and distributing the remaining assets.

• Prepare a formal accounting: California law requires trustees to provide a detailed accounting to the beneficiaries showing all receipts, disbursements, asset gains, losses, and trustee fees, unless the beneficiaries waive this requirement in writing.
• Obtain liability releases: Before distributing assets, ask beneficiaries to sign a receipt and release form confirming they approve of the accounting and release you from future liability regarding your management of the trust.
• Distribute trust assets: Transfer ownership of the remaining assets to the beneficiaries as directed by the trust terms. This may involve drafting new deeds for real estate, transferring titles for vehicles, or writing checks from the trust bank account. Once all assets are distributed and the final expenses are paid, you can close the trust account.

Schedule a Consultation Today!

If you would like to work with a Petaluma, CA estate planning lawyer to develop a plan or provide guidance during the administration process, send us a message or call us at 707-769-9975.