Trust administration occurs after the death of an individual who established a Trust. The administration process is necessary in order to handle expenses and outstanding debts, gather the assets available for distribution, retitle assets for the benefit of the surviving spouse if married, handle preparation and filing of gift, estate and income taxes, and for eventual distribution to the intended beneficiaries. Trust law dictates that each of these necessary steps is handled with precision and diligence. Accordingly, the team at Bohm Wildish & Matsen, LLP has a dedicated department with extensive expertise in Trust Administration.
“Comprehensive knowledge of Trust law and the tax ramifications associated with Trust funding and distribution enable our clients and beneficiaries to obtain the best service in this complex area.”
Trust and estate litigation requires a skilled and experienced legal team that can understand the elaborate and complex legal and financial issues involved in these types of disputes as well as the delicate and emotional nature of these cases. Trust and Estate litigation may be necessary to protect the rights of certain heirs and family members. Oftentimes, litigation is necessary because of poor drafting of the testamentary documents or as a result of disputes among the beneficiaries or the individuals named to manage the assets of the Trust or estate.
The goal at Bohm Wildish & Matsen, LLP is to initially attempt to resolve disputes involving Trusts and Estates through communication and mediation before bringing an action in Court. By resolving conflicts in this fashion, the parties avoid the high costs often associated with litigation proceedings, a tremendous amount of time required by the Court system, and hopefully maintain harmony between the parties who are often family members. When litigation proves unavoidable, the team at Bohm Wildish & Matsen, LLP has a proven track record in successfully prosecuting and defending our clients. Our team utilizes extensive knowledge of trust and estate law with a combined 100+ years of experience in order to realize the most favorable outcome.
Revocable Living Trust
- Asset Protection Trust
- Charitable Trust
- Discretionary Trust
- Estate Planning
- Family Trust
- Incentive Trust
- Irrevocable Trust
- Living Trust
- Remainder Trust
- Reversionary Interest Trust
- Revocable Trust
- Special Needs Trust
- Spendthrift Trust
- Supplemental Needs Trust
- Testamentary Trust
DO I NEED AN ATTORNEY TO ADMINISTER A TRUST?
The trust administration process can quickly become complicated, particularly if several beneficiaries are involved. Disputes can arise about the validity of trust, as well as the proper manner of execution, and resolving these issues often requires the assistance of an attorney specializing in the administration of trusts. In order to ensure that your rights are fully protected in these types of situations, it is essential to have the representation of a skilled legal professional. If any trustee problems arise, trust attorneys can assist in removing bad trustees. Trust Attorneys are often retained by surviving spouses, children, other family members and friends to contest the validity of a trust that does not reflect the decedent’s actual intent. They also provide accounting of assets, debts, income and liabilities to all beneficiaries.
WHAT ARE MY RESPONSIBILITIES AS A TRUSTEE?
Most people use an attorney to explain and coordinate with them on the trust administration. The attorney will need to see a copy of the trust, will and list of assets, debts, expenses and bills. As trustee, you have a fiduciary responsibility to the trust beneficiaries. Your responsibilities as trustee for a typical trust administration include the tasks listed below and although not a complete list it covers most of the tasks a trustee will have to complete to administer a trust.
- Order Death Certificates.
- Locate the Trust and Will and review.
- Identify the beneficiaries as the California Probate Code requires the trustee to send a notice to all trust beneficiaries and heirs.
- This notice must be sent within 60 days of death.
- Lodge the Original Will with the probate court within 30 days of death.
- Inventory trust assets and liabilities. Review all trust investments and get date of death values.
- Protect trust property to confirm adequate insurance and retitle in your name as trustee.
- Transfer property into you name as trustee. Any real property owned by trust requires an Affidavit Death of Trustee to be filed and recorded with the county recorder together with an original Death Certificate. This provides notice that you can deal with the property.
- File a Claim for Reassessment Exclusion with the county assessor for any transfers between parent and child to avoid a reassessment.
- Get the trust a tax identification number as you cannot use decedent’s social security number. All banks and financial institutions will want you to give them this new tax identification number.
- Notify Social Security of the death.
- Mail a Notice together with copy Death Certificate to the California Department of Health Care Services within 90 days of death to check if any repayment due to Medi-Cal.
- Keep records of all trust receipts, expenses and your expenses as trustee. As trustee, you will have to provide a formal written accounting to the trust beneficiaries.
- Distribution – after liabilities have been paid and assets liquidated you may be in a position to either fully distribute the trust or make preliminary distributions to the beneficiaries. It is always recommended to hold back funds for any unknown expenses for a minimum of six months to a year. Once it is reasonable to believe there won’t be any more expenses then you can make final distributions.
- Get receipts on distribution from the beneficiaries.
WHAT INFORMATION DO I NEED TO PROVIDE BENEFICIARIES IF I AM TRUSTEE?
Most beneficiaries will not understand the trust administration process and will be concerned about their lack of understanding and control. You may be doing everything right from a legal standpoint, but if the beneficiaries don’t know what you’re doing, or why, then you’re not likely to get their cooperation or support. Having an attorney advising you on the steps to be taken can alleviate any beneficiaries’ concerns and it is advisable to:
- Have an early meeting with beneficiaries to sit down and go over the process of trust administration. An attorney who is helping you in your role as trustee can also be at that meeting to answer questions about the trust, how trust administration works and your responsibilities.
- Keep beneficiaries informed.
- Send out the Statutory Notice to Beneficiaries required by the California Probate Code.
DO I NEED TO FILE TAXES FOR THE TRUST?
You will need to file a final income tax return for the decedent and also a fiduciary tax return to report income earned on trust assets from date of death until the date the assets are distributed.
You might need to file a Form 706 Estate Tax Return if the value of the estate exceeds the estate tax exclusion amount for the year of death. In 2016 the estate tax exclusion is $5,450,000 which is the amount you can die with without an estate tax being due. In addition, the Estate Tax Return can be filed even though the estate does not exceed the annual tax threshold so that you can carry forward the unused exclusion to the surviving spouse’s estate on death so that there is doubling up of the exclusion. In order to get this portability the surviving spouse has to file a Form 706 Estate Tax Return and make a portability election.
CAN I BE PAID FOR MY SERVICES AS TRUSTEE?
Administering a trust can be very time consuming and at times complicated. It is not unreasonable to want to get paid for your time. There are no set monetary trustee fees under California law. Most trust agreements will provide that a trustee is entitled to charge a reasonable fee but do not usually state the amount. The fee can be based on a percentage of the estate value plus a percentage of the income earned by the trust. The fee can also be calculated on the number of hours you spend and bill by the hour. You can also charge a flat fee. However, you cannot overcharge and it would be wise to discuss how and what you want to charge with your attorney. The amount you charge will be included in the written accounting you have to provide to the beneficiaries and could be subject to challenge. Trustee’s fees are income tax deduction for the trust but taxable income to you and must be declared on your personal income tax return.
CAN SOMEONE FILE A CONTEST AGAINST THE TERMS OF A TRUST OR WILL?
If someone wishes to challenge the terms of a Trust or a Will, he or she may do so by filing an action in Superior Court called a “Contest.”
Common reasons to challenge a Trust are that you believe the Settlor was pressured into creating or signing the Trust; you believe the Settlor was not competent when she signed the Trust; another person who helped to create the Trust will benefit from the Trust; or the document being present as the Trust is not the most recent or most accurate document.
Read the Trust or the Will carefully and consult with an experienced attorney before filing the Contest because it may contain terms that disinherit or otherwise affect the rights of a person who files a Contest.
IS LITIGATION EXPENSIVE?
Sometimes. Preparing and filing even a simple action may require significant time and effort on the part of your attorney, which results in expensive legal fees. Additionally, litigation between family members (as is frequently the case in trust and estate litigation), can be extremely emotionally taxing. For these reasons, our office recommends considering several other avenues of dispute resolution prior to filing a litigation action in court, especially between family members.
CAN SOMEONE FILE A PETITION TO HAVE ME REMOVED AS TRUSTEE?
Yes. Some Trust documents include provisions to remove a Trustee, and a person may file a Petition based on the terms of the Trust. Otherwise, a Trust settlor, co-Trustee, or Beneficiary may file a Petition to Remove a Trustee under Probate Code §15642. Common grounds for Trustee removal are where the Trustee has failed to comply with the terms of the Trust, where co-Trustees are unable to cooperate, or where the Trustee is incapacitated.
DOES A BENEFICIARY HAVE A RIGHT TO MAKE ME GIVE THEM AN ACCOUNTING?
A Trustee has a general duty to communicate with the Trust beneficiaries. There is some flexibility in this requirement; however, unless the Trust provides otherwise or the beneficiary has waived the right to an account, typically, a Trustee is required to provide an annual account to the Trust beneficiaries, showing all of the financial transactions of the Trust.
If a beneficiary has requested an account in writing and the Trustee has not responded in sixty days, the beneficiary may then file a Petition in Probate Court for an order compelling the Trustee to account.