Trust Administration

For most individuals, a Trust Administration can occur at the most unpleasant time: the incapacity or death of a family member or dear friend. 

While our emotions are swirling, we can find ourselves left helpless because we are legally unable to make the necessary legal and financial decisions for that incapacitated family member or dear friend, or the grieving family members.  This conundrum presents a multitude of unfamiliar tasks and complex actions related to the administration of a trust after someone has become incapacitated or has died.

Post-mortem trust administration consists of a variety of tasks that a Trustee must complete when managing and administering the trust for the benefit of the trust beneficiaries. These includes specific tasks spelled out in the trust document or tasks required of all trustees under state or federal law. The post-mortem administration of a trust is generally without Probate Court supervision.

Copenbarger & Copenbarger LLP can and will provide you with the help you will need to complete a Trust Administration properly, thoroughly, and efficiently.

Trust Administration

For most individuals, a Trust Administration can occur at the most unpleasant time: the incapacity or death of a family member or dear friend. While our emotions are swirling, we can find ourselves left helpless because we are legally unable to make the necessary legal and financial decisions for the grieving family members or friend.

This conundrum presents a multitude of unfamiliar tasks and complex actions related to the administration of a trust after someone has become incapacitated or has died/become deceased.

To better understand the trust administration process…

… we need to review what a trust is and what roles people will play during the administration.

First, a trust is a legal document that describes a legal relationship where an individual transfers title of property to another person for the benefit of either themselves or someone else.

Trustmaker– this person, often referred to as a grantor, trustor, or settlor is the person that creates the trust and transfers property owned by the Trustmaker to the trustee of the trust.

Trustee– this person has the legal obligation to manage the property that is placed into the trust, following the instructions of the Trustmaker as set out in the trust document, and making distributions to the Trust’s beneficiary(ies) as provided in the trust document.

Beneficiary– this is the person or entity that will receive the benefits of the trust.

The administration of a trust while the Trust Maker is alive, but incompetent, is an “incapacity administration”. The administration of the trust after the Trust Maker has died is called a “post-mortem administration.” Both types of administrations involve a process and procedure with the goal of managing and distributing the Trust assets in the most timely and efficient manner to the intended beneficiary(ies).

Post-mortem trust administration consists of a variety of tasks that a Trustee must complete when managing and administering the trust for the benefit of the trust beneficiaries. These includes specific tasks spelled out in the trust document or tasks required of all trustees under state or federal law. The post-mortem administration of a trust is generally without Probate Court supervision.

The post-mortem trust administration tasks can be divided into several categories:

LEGAL CATEGORY -these tasks are required by state and or federal laws.

  1. Update land records. This removes the decedent’s name from the real property.
  2. Notification to the County Assessor – In CA the County Assessor is notified of the death of an owner or a person who has a beneficial interest.
  3. Beneficiaries and or Heirs at Law must be notified. This is required when a revocable trust or a portion of a revocable trust becomes irrevocable, or when there is a change of trustee of an irrevocable trust.
  4. Notices must be sent to the CA Dept. of Health Care Services regarding Medi-Cal benefits.
  5. The Last Will & Testament has to be lodged with the Probate Court within 30 days of the decedent’s death.
  6. The Trusteemay have to Obtain a Taxpayer Identification Number (TIN) for the Trust.
  7. The estate representative (perhaps the Trustee) must Notify federal and state taxing authorities of the fiduciary relationship of the trustee and the trust it will be managing.
  8. The trustee must understand their Responsibilities and Duties, as found in the state Probate Code.

TAX CATEGORY -tasks required by state and federal taxing authorities.

The decedents Personal Income Tax Returns (federal and state) must be prepared and filed.

Fiduciary Income Tax Returns (federal and state) must be filed for the trust.  Some of the different general types of trust that would need tax returns are:

  1. An Administrative Trust
  2. Decedent’s Trust
  3. Marital Trust
  4. Estate (Probate)

An Estate Tax Return may have to be prepared and filed.

The surviving spouse can make an Estate Tax Portability Election. The Election must be made within 2 years of date of death.

The Income Tax Basis of property has to be determined –An Inventory of Assets must be prepared.

Property Tax issues must be evaluated for real property in California.

TRANSFER OF THE DECEDENTS PROPERTY -The ownership of the decedent’s property will determine how property is transferred.

  1. Solely owned property –a probate procedure will be necessary
  2. Jointly owned property –
    1. right of survivorship – owned by surviving joint owner.
    2. tenants-in-common – decedent’s interest is solely owned and will require a probate procedure.
  3. Beneficiary designated property –
    1. owned by the designated beneficiaries 
    2. designated beneficiaries must make a claim with the company(ies).
  4. Transfer by the Last Will & Testament – a probate procedure will be necessary
    1. Default State’s Will
    2. Prepared Will w/o Trust
    3. Pour-Over-Will
      1. Probate of the assets to the trust
  5. Assets transferred by the provisions of the trust.  The provisions of the Trust dictate how the assets are treated and who benefits from the trust assets.  Some of the factors that need to be recognized are:
    1. Was the trust established by a single Trust Maker or multiple Trust Makers;
    2. Is the Trust Maker(s) alive and capacitated;
    3. Is the trust irrevocable or has the trust become irrevocable.
    4. If a joint trust (2 or more Trust Makers), does (or should) the trust divide after the 1st Trust Maker’s death.

All these tasks, including, but not limited to, performing the allocation and funding (if necessary), distribution of assets, preparing an accounting, and closing the administration are overwhelming.

There are potentially hundreds of tasks in each trust administration and failing to do one can lead to critical tasks being left undone, exposing the trustee to significant potential liabilities.

The role of Copenbarger & Copenbarger LLP is to thoroughly guide and thoroughly counsel you through these processes and procedures with the ultimate goals of protecting the trustee from legal exposure, and impowering the trustee with the information they will need to carry out their duties and responsibilities of administering the trust.

Why Copenbarger & Copenbarger LLP?

The process of making sure you have the legal protections in place. To make sure you your family, and your financial resources are properly protected. This requires you to help the attorney determine what are the most important areas of your life to secure. It involves asking the what if questions of life. What if I become disabled, what if I did, what if my spouse becomes disabled, what if they die, what if my children are unable to take care of themselves when I become disabled or die.