Duties of a Successor Trustee Following the Death of the Settlor/Trustee
- Review Trust & Will in detail.
- [If necessary] Check funeral arrangements for Settlor. Order death certificates.
- If the deceased was receiving income from Social Security, you must notify Social Security and cancel the benefits.
- If the deceased was receiving income from PERS, STRS, or any other pension plan, you must notify them and cancel the benefits. There may be a small death benefit payable to a designated beneficiary, so check on that and submit a claim accordingly.
- Identify any life insurance policies, annuities, pension plans, or other assets that have designated beneficiaries. Submit claims for benefits as appropriate or notify named beneficiaries of their right to submit claims. If the decedent’s IRA named their trust as designated beneficiary, contact the IRA custodian promptly and provide them with a copy of the trust. If the deceased was taking required minimum distributions and their distribution for the year in which they died had not yet been taken, BE SURE TO HAVE THE BENEFICIARY TAKE THIS DISTRIBUTION BEFORE THE END OF THAT SAME YEAR – failure to do this can result in a substantial penalty.
- Obtain a federal tax identification number (FEIN) for the trust using IRS form SS-4, and submit IRS form 56 to arrange for all tax correspondence to go to trustee.
- Secure the Settlor's home and determine whether there are any specific instructions regarding the distribution of furniture, furnishings, etc.
- Notify trust beneficiaries and heirs as required by law [see Probate Code § 16061.7]. Advise beneficiaries of the trust provisions concerning them and give them some idea regarding anticipated distribution dates. (If there is any reason to expect a challenge to the trust, don’t make distributions for at least 120 days after the Notice goes out to the beneficiaries.)
- File the original will with the Superior Court Clerk (required even if no Probate).
- Determine what assets are on hand and the nature and location of those assets (cash, bank accounts, securities, real estate, vehicles, etc.).
- Determine what ongoing bills will have to be paid and what funds are available.
- Establish date-of-death values for all trust securities (stocks, bonds, mutual funds, etc.) by contacting the brokerage firm or mutual fund that holds the account(s), or by using an appraisal service. Get these date-of-death values in writing.
- Hire advisors as needed (attorney, CPA, investment advisor, appraisers, etc.)
- Review investment portfolio with advisors to determine whether any immediate actions are necessary.
- Identify, locate, and value all non-trust assets (if any), including safe deposit boxes.
- Determine whether there will be a need to probate the non-trust assets (if any). If the non-trust assets total less than $100,000, probate will not be necessary.
- Obtain written appraisal for any real estate and business interests held in the trust.
- Record an Affidavit of Death of Trustee (together with a certified copy of the death certificate) for each piece of real property held in the trust.
- For each California property, prepare a Death of Real Property Owner form, a Preliminary Change of Ownership Report, and, if appropriate, a Claim for Exclusion from Reassessment for Transfers Between Parents and Children, and file these with the County Recorder/Assessor in the county where the property is located within 150 days of the date of death.
- Cancel credit cards and close accounts (don’t just cut up the cards).
- Verify and pay valid debts of the deceased settlor (wait two months on medical bills that may be paid by insurance).
- After all covered medical expense claims have been paid, arrange to cancel any existing medical insurance policies.
- If deceased was receiving benefits from Medi-Cal, you must notify the Director of Health Services in Sacramento and submit a certified copy of the death certificate. The DHS has four months to notify you of any claim against the estate.
- After vehicles have been sold or transferred, cancel auto insurance.
- If necessary, set up a tickler file to note important dates: income and estate tax return due dates, CD maturity dates, property tax due dates, etc.
- Get trust accounts re-titled in your name as successor trustee and use the trust’s tax ID number as the tax ID number on those accounts.
- Arrange for the preparation and filing of the final income tax returns for the deceased by the April 15 due date.
- If the total value of all trust and non-trust assets (including pension plans and life insurance proceeds) approaches or exceeds $3,500,000 before subtracting outstanding debts, mortgages, etc., list all assets and their values and meet with an accountant who can prepare the estate tax return (Form 706). That return, together with the taxes owed, must be filed no later than the due date, which is 9 months after the date of the settlor’s death. (A six-month extension for the filing of the return is easily obtained, but the estimated tax must be paid within the first 9 months). If the estate includes real property in another state, it is possible that a separate state death tax may be imposed and a separate tax return required for that state.
- If there definitely will be estate taxes to pay, consider doing an alternate valuation of the assets six months after death if this is likely to lower the estate tax liability.
- Continue administration of trust or distribute remaining assets in accordance with trust directions and state statutes. If assets will be held in trust for a period of years, the trustee will need to comply with the Uniform Prudent Investor Act requirements. Cash distributions of specific bequests that are not made within one year after death will accrue interest at the rate of 7% from the one-year mark, unless the trust document expressly says that no interest will accrue or the funds are intended to be held in trust.
- If trust is to continue in existence, there will be annual trust tax returns (forms 1041 and 541) that must be prepared and filed, and appropriate accounting records must be maintained. Beneficiaries are legally entitled to accountings and may inquire as to the status of trust assets/investments. Keep beneficiaries properly informed.
- Once all obligations have been met, all tax returns filed and taxes paid (and IRS has approved or audited the returns, or the time limit for IRS challenges has passed), and all assets have been distributed, the trust may be terminated.