Trust Administration & Probate

01. Review the Living Trust

Particularly review the sections dealing with the trust beneficiaries, the distribution of the trust property, and the Trustee’s powers. Determine if any of the assets are to be immediately distributed, or if they are to remain in the trust for later distribution to the beneficiaries.

02. Order death certificates

Death certificates will be needed to obtain the proceeds of any life insurance policies and possibly for other transfers. We recommend ordering 10 certified copies of the death certificate to begin with. These can be ordered from the funeral home or the County Recorder’s office.

03. Notify all beneficiaries

The Successor Trustee will need to prepare a notification of death as required under the California Probate code and provide this notification to all beneficiaries and heirs.

04. Accept the trust

The Successor Trustee of a living trust must formally accept the office.

05. Check bank accounts

Funds may be needed immediately to pay funeral expenses, so make sure that there is enough money available in the trust checking account.

06. Contact Social Security

Hold any social security received after the date of death. Contact the VA if applicable.

07. Notify all life insurance companies of the death

This can be done by calling the local agent, if applicable, or writing the letter to the company’s main office. Some companies require a certified copy of the death certificate; some companies will accept a photocopy of the death certificate or even a copy of the newspaper obituary notice. Most companies require a death claim form be completed.

08. Contact insurance agent

To continue my homeowners’ or renters’ policy, secure the Grantor’s valuables and residence. Contact the Post Office regarding mail.

09. Prepare an inventory of all of the assets in the trust

Include each asset’s value at the date of death. This is necessary to determine a new cost basis for these assets in order to take advantage of the “step-up” in the basis (that is, the “cost”) of the assets. That will minimize the taxable gain when the assets are sold. It is also necessary for federal estate taxes if applicable. It is advisable to obtain a written valuation for the assets to be presented to the auditor to obtain a tax release, if required. It is also necessary to get a written opinion on the fair market value of any real estate owned by the Grantor. An appraisal should be obtained from a qualified appraiser. The total value of all property in the trust, (including property passing to the trust by virtue of the Grantor’s Will), will determine whether it will be necessary to file a federal estate tax return. It is necessary to gather this information. The federal estate tax returns are due nine months after the Grantor’s death.

10. Alternate Valuation

In order to minimize estate taxes, it may be necessary to obtain an alternate valuation of the assets in the Grantor’s estate, so, do not dispose of the grantor's assets, by sale or otherwise, until you have talked to an attorney.

11. Make sure that all of the Grantor’s assets are held in the trust name

If there are any assets which are not in the trust be sure to discuss this with an estate planning attorney, who will be able to determine whether these assets will then require a probate court proceeding. The Grantor’s most recent federal and state income tax returns should be reviewed, since they may provide a clue to assets otherwise unknown assets.

12. DO NOT …

Cash in or liquidate any investments, savings bonds, annuities, IRAs or make any payment elections for any accounts or investments before meeting with an attorney and/or financial advisor. Some assets have significant income tax consequences upon their liquidation or payment.

13. Review business agreements

Review any business agreements, contracts, stock certificates, partnership agreements, etc. to which the Grantor and/or the trust are parties. If the trust property includes a business interest, it will be important to document the value of this interest if either the estate is likely to be taxable or the business interest will be sold. To obtain this valuation a qualified appraiser of business interest should be hired.

14. Obtain a Tax ID Number

If all or part of the Grantor’s living trust has become irrevocable because of the Grantor’s death, it will be necessary to obtain a new taxpayer identification number for that trust from the IRS. Use IRS from SS-4 to get this number. If the trust thereafter has taxable income it may be necessary to file IRS Form 1041 as the trust’s income tax return.

15. Review and pay the bills

Review any bills or accounts owed by the Grantor and pay the ones which are actually owed.

16. File income taxes

File income tax returns and pay income taxes, both for the Grantor and for the Trust. It may be necessary to file the Grantor’s final income tax return. The Grantor’s attorney and CPA can help determine this. In addition, if the trust has earned and/or retained income, it may be necessary to file federal and state income tax returns. If all of the trust income has been distributed to beneficiaries, then the beneficiary is responsible for including this income on their own individual income tax returns. However, form 1041 must be filed annually until all trust assets are distributed.

17. Collect the Grantor’s credit cards and cancel them

Before doing so, check for automatic withdrawals for bill payment.

18. Distribute the Grantor’s personal effects

Distribute any personal effects and household furnishings as provided for in the trust, including any written memorandum or instructions.

19. Review the allocation and distribution of the remaining trust property

Determine if any assets are to be retained in the trust, sold or distributed, or converted to cash. Remember to ascertain if there are any outstanding debts or taxes to be paid first in order to determine the cash flow needs.

20. Determine if a disclaimer is appropriate

It may be appropriate for one or more of the beneficiaries to disclaim an interest in all or part of his or her share, so that the property will automatically pass to the next beneficiary in line. This absolutely must be done within nine months after the date of death. An estate planning attorney will be able to assist in determining whether any disclaimer is appropriate.

21. Review investments

Make sure that the current investments retained in the trust are appropriate for the income and growth objectives of the trust, which will depend on the projected future needs of the trust. The Successor Trustee should review the investments at least quarterly to determine whether, as a prudent investor, some reinvestments are necessary.

22. File federal estate tax Form 706

This form will need to be filed only if federal estate taxes are due or to elect portability for the surviving spouse of the Grantor. Estate tax returns must be filed within nine months of the date of death but a six-month extension to file these returns may be timely filed by the Successor Trustee. Generally, no interest or penalties are incurred in connection with this extension unless estate taxes are currently due.

23. Distribute the assets

After all the Grantor’s bills and the expenses of administering the trust have been paid, the final step is to distribute the remaining trust property. Pay careful attention to the distribution and allocation of assets to ensure that this is done in accordance with the Grantor’s wishes. It may be appropriate to sell some assets and distribute the cash to facilitate equal division among the beneficiaries, provided this is in accordance with the terms of the trust.