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CALIFORNIA TRUST ADMINISTRATION
In a nutshell, California Trust administration is the process whereby your named successor trustee marshals your assets, pays off your creditors, and eventually distributes your estate to your beneficiaries. Sounds easy enough, but actually it usually isn't. Besides thousands of permutations that can occur during this process (depending on each particular person's circumstances), every case requires “legal” Notice be sent out to each person named in the trust as well as certain family members, timely filing of tax forms and several other mandatory tasks. Also, if there is any real estate, numerous legal documents changing ownership must be timely filed with the appropriate State Property Recorder and Assessor offices of each county where there is real estate. Actually, the list of potential actions required of a successor trustee are too numerous to count. Without a doubt, the legal responsibility and fiduciary obligations thrust upon successor trustees are sometimes onerous and can even be scary. That's because failure to comply with California Trust Laws by properly completing Trust Administration can result in extremely negative repercussions for beneficiaries and successor trustee can even be sued.
Given all the work, obligations and potential liability, sometimes people ask me, “What's the difference between Trust Administration and the 'dreaded' Probate process? The answer might surprise you: not much. In either situation, almost all the same tasks must be done. But probate generally takes twice as long to complete and costs significantly more. But not always! If there is a dirty little secret about estate planning, this is it: Many estate planning attorneys fail to mention anything at all about the Trust Administration process which must be implemented after the death of the person who created the Trust. Instead, many advisors would have people believe that a Living Trust is all that anyone will ever need. But believing that when the Settlor of a trust dies, the trust somehow magically resolves itself is not only wrong, it can be dangerous. Again, and I can't emphasize this enough, it's because successor Trustees have fiduciary obligations to comply with, and failure to do so can easily trigger liability.
(As an aside, we commonly have estate planning Trustee conversations with married clients who have exactly two children. Sometimes they grapple with whom to name as their successor Trustee. Should the siblings be co-Trustees, should the older child be named first successor Trustee while the younger child is named the second successor Trustee, or maybe it should be the “responsible” child or someone else entirely? Point is, parents are commonly concerned about who to chose as well as not insulting the child who is not chosen first as Trustee. This is about the time we explain to clients that generally speaking, the child who is not chosen is the lucky one. The child who is chosen to serve as successor Trustee has a lot of work to do and potential liability to boot. The child who is not chosen can kick back, do nothing and if upset, can even sue the successor Trustee! When we highlight these issues to clients, we are serious, but we are also kidding a bit - since we as as trust attorneys do most of the Trust Administration work - but the point is that Trust Administration is a big and important job.)
Anyhow, Trust Administration comes in all shapes and sizes. Sometimes the work is relatively easy to complete. Other times, it is extremely complicated. By the way, in our experience, the older the Living Trust, the more complicated it is to administer for married couples. That's because many, if not most, married couple California Living Trusts created prior to 2010 have sophisticated tax planning clauses which require dividing up assets and then literally moving those assets into sub-trusts, which then may require the trustee to file extra tax returns every year the surviving spouse is alive as well as many other extraneous tasks. While this planning made sense in the 1990s and 2000s, it rarely makes sense today since “death taxes” (i.e., estate, gift and generation-skipping taxes) do not apply to people who have less than roughly $11.5 million in assets ($23 million for a married couple). So please do yourself and your loved ones a favor and update your living trust, if it is “old”.
Now, getting back to Trust Administration, please watch this quick video that I created over ten years ago. Although this video is a bit dated, it is still 100% applicable today:
For information about assets not held in a trust, visit our Probate Administration page.
If you are a successor trustee who needs to Administer a Trust and are ready to start the process, please schedule a consultation with our office to discuss your case. We have administered thousands of trusts and will make the process easy for you. If issues arise with beneficiaries or others, you should take comfort in knowing that we have successfully resolved hundreds of cases with: courts, mediators, the Internal Revenue Service, Franchise Tax Board, Assessor, Department of Health Care Services, Social Security and more. We always zealously advocate for our clients and we will help you through this difficult process, no matter what arises.
Here at Kaiden Elder Law Group, PC, we specialize in California Trust Administration. To make sure you are correctly carrying out your duties as Trustee of a Trust, please contact us for a Trust Administration Consultation.