Unpacking The Trust Administration Process In California

After Death

In light of a loved one dying, the last thing you want to be consumed with is managing matters related to their estate. The unfortunate reality is that there is no way around this. These things simply must be handled. There are many moving parts to the trust administration process in California, so it’s vital you prepare yourself accordingly. We aim to nudge you in the right direction.

Notification Of Death

Usually, the first step of administering an estate in California is notifying individuals, companies, and agencies that your loved one has passed. This can be challenging because people use so many services and receive benefits such that it can be easy for some to slip between the cracks, but do your best to cover as many as you can. Address any that you miss once you’ve realized you missed them.

The goal here really is to prevent overpayment for services no longer needed, especially for something like Social Security. Here’s a basic checklist of key parties to contact:

• Social Security;
• Banks;
• Mortgage lenders;
• Credit card companies;
• Utility providers.

If you’re the successor trustee, you’ll also need to send out a formal probate trust notice that notifies the beneficiaries that they have assumed the role. This is called a 16061.7 notice. You’ll want to include a copy of the trust and any amendments to it. Sending this officially starts a 120-day period where the trust can be contested. Do not distribute anything from the trust until this period has passed, if for no other reason than for trustee liability’s sake. Doing so will make things incredibly difficult later on.

Property Management

If there’s property within the trust that needs to be sold, the trustee oversees this process, ensuring that the property is appropriately valued and sold in accordance with the trust’s terms.

Trust Accounting

If beneficiaries request an accounting of the trust assets, the trustee must provide this. Keeping detailed records of all transactions and communications related to the trust to ensure transparency and compliance with the trust’s terms is essential should this be necessary.

Distribution of Assets

Once all debts, expenses, and taxes are paid, and any required accountings are provided, the remaining assets in the trust are distributed to the beneficiaries according to the trust’s terms.

Trust Finalization

After the assets are distributed, the trust becomes irrevocable. The trustee needs to obtain a Tax ID number (EIN) for the trust and open a bank account using this information to manage and distribute the trust’s assets.

There are quite a few steps that go into this process, especially if you are trying to limit the trustee’s liability. Although true of anything related to estate planning, it’s an especially good idea to consult with an attorney about this process.

Timeline Of Administering An Estate

Before we dive into the timeline of administering an estate, we think it worthwhile to dispel some common misunderstandings first. Many refer to executors when talking about trusts, but technically speaking, they have nothing to do with one another. The term executor exclusively refers to someone who exclusively deals with wills. The individual in charge of a trust is called a trustee. These terms are very frequently used interchangeably, but wrongly so.

In California, trustees typically have as long as is reasonably necessary to administer a trust. Beyond this, the timeline will largely depend on the specific assets and circumstances of the trust in question. A majority of trusts have a six-month grace period built in where the trustee can delay the administration of the trust without facing any penalties or consequences.

Attorneys Taylor and Sophia Preston based in Irvine, CA, are both experienced estate planning lawyers. They specialize in trust administration in California and have guided countless clients along managing a trust. Their in-depth know-how from notifying relevant parties of a loved one's passing to resolving conflicts among beneficiaries will help you successfully navigate the process of trust administration. Their strive to deliver leading services that ensure transparency, compliance, and efficient asset distribution.

Facing challenges in trust administration? Contact Preston Law Group, P.C. today to schedule a consultation and get the solutions you need.

The reason for this is simple — most people want some time to grieve. Trustees are, more often than not, family members or a loved one of the person who has died and are not ready to immediately start dealing with financial and practical decisions. They, along with the entire family, need some time to grieve the loss of their loved one.

But once they start administering the trust, it’s best they do so in a timely manner, working as quickly as is reasonably possible. Depending on the complexity of the trust and what the one in question specifically calls for, it could take as short as three to four months or as long as several years.

For example, let’s say there’s a beneficiary who is 16 years old, and the trust in question says they can’t receive their inheritance until they’re 25 years old. This means the trustee will be involved with managing the estate and trust for something like nine years, at least until the beneficiary reaches the age of 25. At that point, they could distribute everything and wrap things up. On the other hand, if the estate is a mere two bank accounts that will go to only one beneficiary in one lump sum, administering it will not take much time at all.

Debt

Debt is a major consideration that, if on the books of an estate, will factor heavily in how it is administered. How exactly the trustee attacks it will likely depend on the type of debt since secured and unsecured debt are considerably different.

Secured debts, such as mortgages or other loans backed by collateral, typically take precedence and must be paid from the estate assets. These debts are generally enforceable, and most trusts outline procedures for settling such obligations. After satisfying secured debts, any remaining assets are then distributed to the heirs as specified in the trust.

On the other hand, unsecured debts, like medical bills or credit card debts, pose different challenges. If creditors are notified of the person’s passing but fail to initiate a claim within a specified timeframe, often governed by the statute of limitations (typically within a year from the date of death), they will likely be barred from recovering those debts.

One advantage of trusts in this context is the privacy they afford. While this doesn’t necessarily absolve one from paying legitimate debts, it can make it more challenging for unsecured creditors to file timely claims against the estate. In contrast, probate proceedings, which are often publicized as required by law, make it easier for creditors to identify and file claims against the estate.

The Mechanics Of Trust Administration

Trust administration is a structured process that flows precisely according to the terms outlined in the trust itself. The trustee’s primary responsibility is to adhere strictly to these terms when distributing assets to the beneficiaries or heirs. Depending on the nature of the assets, the transfer can take various forms — from deeding a home to wiring cash or shipping personal property directly to the designated heir.

Given how complex and risky trust administration can be, many trustees opt to seek professional guidance from a trust administration attorney, often the one who drafted the trust, to assist them throughout the process. They provide invaluable advice, ensure compliance with statutory and trust-specific requirements, and guide the trustee on critical decisions. The attorney will also take on responsibilities such as drafting any legal documents that become necessary as the process unfolds, sending required notices to beneficiaries, and offering referrals for other professionals like realtors, tax advisors, or estate sale managers, as needed.

If you’re a trustee, don’t think you are alone or take on so much that you feel overwhelmed. You are not alone, and help is readily available. In fact, chances are the trust you’re overseeing allows for any legal fees you need to pay to be paid directly from the trust assets. This removes the financial burden you’d otherwise be subject to associated with the administration.

Conflicts And Disagreements

Conflicts and disagreements in trust administration are more common than you likely suspect. Despite the best intentions, disputes often arise among beneficiaries over various aspects of asset distribution, such as the perceived value of certain assets or the fairness of the distribution. This is true even of families who would have had us convinced they would never argue under these circumstances. There is almost always a situation in every case where at least one beneficiary has some sort of issue, disagreement, or complaint about the distribution of the assets.

Yet, when these conflicts emerge, several avenues for resolution are available. One approach involves litigation, where a beneficiary may file a petition with the court to contest the distribution or seek clarity on certain things. Beneficiaries can also negotiate directly with one another to reach an agreement on how assets should be distributed, often facilitated by the trustee. This approach isn’t the ideal one, more often than not.

In cases where beneficiaries cannot resolve their differences independently, the trustee may seek court intervention by filing a petition for instructions. This legal action asks the court to provide guidance or make a ruling on the disputed issues, thereby shielding the trustee from potential liability for making incorrect decisions.

Another effective method to resolve conflicts is mediation. In this process, all parties involved, including the trustee and beneficiaries, meet with a neutral mediator to discuss their concerns and attempt to reach a mutually acceptable resolution. Mediation can be cost-effective and, otherwise, just a generally efficient alternative to litigation. If so, it will likely result in a written settlement agreement outlining the agreed-upon terms. Fortunately, going to trial is extremely rare, although it does happen very seldom.

The lack of communication and transparency between the trustee and beneficiaries or among the beneficiaries themselves can significantly contribute to disputes. Misunderstandings and assumptions stemming from inadequate communication can lead to mistrust and, ultimately, litigation. Maintaining open, transparent communication throughout the trust administration process is crucial in preventing misunderstandings and potential conflicts. Planning far in advance and providing clear guidance in an estate plan is equally, if not more, important to steering clear of these sorts of disputes.

For more information on Trust Administration Process In California, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (949) 993-0639 today.