When someone with a revocable living trust dies, the successor trustee steps into a position of significant responsibility. You’re now in charge of managing assets, paying debts, filing taxes, and distributing property according to the trust’s terms. This role carries legal obligations that require careful attention and organized execution.
Our friends at Montana Elder Law, Inc discuss trust administration as one of the most important responsibilities a person can undertake for a deceased loved one. A trust lawyer can guide successor trustees through the process, particularly when complications arise. The work ahead requires patience, diligence, and often several months to complete properly.
Being named as successor trustee is both an honor and a burden. The person who created the trust trusted you to carry out their final wishes. That trust comes with fiduciary duties enforceable by law. You must act in the beneficiaries’ best interests, follow the trust terms precisely, and keep meticulous records of everything you do.
Initial Steps After Death
Your first task involves obtaining multiple certified copies of the death certificate. You’ll need these for nearly every institution holding trust assets. Banks, investment companies, insurance providers, and government agencies all require certified copies before releasing information or transferring assets.
Read the trust document thoroughly. Understanding the terms is fundamental to proper administration. Note who the beneficiaries are, what they’re entitled to receive, any conditions on distributions, and specific instructions about asset management or sale.
Locate all trust assets. This might involve searching through files, mail, and bank statements. Common trust assets include:
- Real estate and property deeds
- Bank and investment accounts
- Business interests
- Valuable personal property
- Life insurance policies payable to the trust
- Digital assets and online accounts
Send formal notice to beneficiaries informing them of the death and your role as successor trustee. Many states require this notification within specific timeframes. California’s notice requirements under Probate Code Section 16061.7 give beneficiaries important rights to request information and accountings.
Securing And Managing Assets
Change locks on real property if necessary. Maintain insurance coverage on all assets. You’re personally liable if trust property suffers damage due to your negligence. Keep homes heated in winter, maintain security systems, and address any urgent repairs.
Open a trust checking account for managing income and expenses. Never commingle trust funds with your personal money. Keep trust assets completely separate to maintain clear records and avoid accusations of improper handling.
Obtain date-of-death values for all assets. These valuations establish the tax basis for beneficiaries and help you report accurately on tax returns. Professional appraisals may be necessary for real estate, businesses, or valuable collectibles.
Continue managing investments prudently. You can’t just let assets sit untended for months. Review holdings, rebalance portfolios if appropriate, and make sure investments align with the trust’s needs and timeline for distribution.
Paying Debts And Expenses
Identify and pay all legitimate debts. This includes final medical bills, credit card balances, utility bills, and any outstanding loans. You should verify claims before paying them. Don’t accept a creditor’s word without documentation.
Handle ongoing expenses while administering the trust. Property taxes, insurance premiums, maintenance costs, and utility bills continue regardless of the owner’s death. The trust pays these from its assets.
File all required tax returns. This typically includes the deceased person’s final income tax return and potentially estate tax returns if the estate is large enough. The trust itself may need to file income tax returns on IRS Form 1041 if it generates income during administration.
According to the Internal Revenue Service, estates exceeding certain thresholds must file federal estate tax returns within nine months of death. State estate or inheritance tax requirements vary and may apply at lower values.
Communicating With Beneficiaries
Keep beneficiaries informed throughout the process. Regular updates prevent misunderstandings and reduce the likelihood of disputes. You’re not required to share every detail, but transparency builds trust and cooperation.
Respond to reasonable requests for information promptly. Beneficiaries have legal rights to certain information about trust administration. Ignoring or delaying these requests creates problems and potential liability.
Prepare accountings showing all receipts, disbursements, and asset values. Most states require formal accountings before final distribution. These documents protect you by demonstrating proper management and giving beneficiaries opportunity to raise concerns.
Distributing Assets
Follow the trust terms exactly when distributing assets. If the trust says to divide assets equally among three children, you must do that. Your personal opinions about fairness or who deserves more don’t matter. The trust controls.
Obtain beneficiary approval and releases before making final distributions. These signed documents acknowledge receipt and release you from further liability. Without releases, you remain potentially liable for claims years later.
Handle specific bequests first, then distribute remaining assets according to the trust’s residuary provisions. Some trusts include detailed instructions about who receives particular items. Others simply divide everything equally or by percentage.
Consider partial distributions if administration will take many months. Beneficiaries often appreciate receiving some funds earlier rather than waiting for every detail to conclude. Just maintain sufficient reserves for remaining debts, taxes, and expenses.
Common Challenges And Pitfalls
Beneficiary disputes rank among the most difficult challenges. Family members may disagree about asset values, distribution timing, or interpretation of trust terms. Your job is following the trust, not making everyone happy.
Missing assets occasionally surface during administration. The deceased person may have forgotten to retitle something into the trust. These assets might require probate, creating delays and additional expense.
Creditor claims sometimes appear months after death. Maintain adequate reserves before final distribution to handle legitimate late claims. You could be personally liable if you distribute everything and then cannot pay valid debts.
Tax complications can derail smooth administration. Complex investments, business interests, or large estates often require professional help. Hiring accountants or tax attorneys is appropriate when needed and the trust pays their fees.
Completing Your Duties
Once all debts are paid, taxes filed, and assets distributed, prepare a final accounting. This document summarizes everything that happened during your administration. It shows beginning values, income received, expenses paid, and final distributions made.
Close the trust checking account after all obligations are satisfied. Cancel any remaining insurance policies, utility services, or subscriptions. Notify Social Security and other agencies of the death if you haven’t already done so.
Keep detailed records for several years after closing the trust. Beneficiaries or tax authorities might raise questions later. Your contemporaneous documentation protects you from claims of mismanagement.
Trust administration demands attention to detail, patience with bureaucracy, and commitment to honoring someone’s final wishes. We recognize the weight of this responsibility and encourage successor trustees to seek guidance when questions arise. Taking the time to understand your obligations and complete each step carefully protects both you and the beneficiaries you serve.