Seven Essential Steps for California Trust Administration
If you’ve been named as a successor trustee, whether for a family member, friend, or loved one, it’s important to understand your duties as successor trustee and what actions are required under California law. Serving as a trustee is a significant legal responsibility, and knowing your trustee legal obligations ensures that the trust administration process runs smoothly and protects you from potential liability.
After the grantor passes away, the successor trustee must take prompt action to manage and distribute the trust assets, comply with legal notice requirements, and ultimately close the trust. Below are the seven key steps every successor trustee in California must complete.
1. Notify Beneficiaries and Heirs
As part of California trust administration, the successor trustee must notify all trust beneficiaries and legal heirs in writing within 60 days of the grantor’s death. This notice should include:
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The trustee’s name and contact information
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Instructions on how to obtain a copy of the trust
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The deadline for contesting the trust
Failing to send this notice can expose the trustee to personal liability.
2. Obtain a Federal Tax Identification Number
Upon the grantor’s death, the trust becomes a separate taxable entity. The successor trustee must obtain a Federal Tax Identification Number (EIN) from the IRS and ensure that all state and federal tax returns are filed until the trust assets are distributed.
Distributing assets before all taxes are paid can make the trustee personally liable for any unpaid taxes. Obtaining the EIN is a key step in proper California trust administration and demonstrates responsible execution of the duties of a successor trustee.
3. File a Death of Real Owner Report with the County Assessor
The trustee must file a Change in Ownership Statement – Death of Real Property Owner with the County Assessor’s Office to prevent future property tax issues.
4. File for Parent-Child Property Tax Reassessment Exclusion (If Applicable)
If trust property is being transferred between parents and children or grandparents and grandchildren, the trustee should file a Claim for Reassessment Exclusion. Under the current California law, the exclusion applies only to the primary residence of the parent/grandparent and only if the child/grandchild plans to move into the property within one year after the parent/grandparent’s death.
5. Take Control of Real Property
The successor trustee must formally assume control of trust-owned real estate by filing an Affidavit of Death of Trustee in the county where the property is located. This provides legal authority to sell, transfer, or manage the property.
6. Keep Detailed Trust Accounting
Trustees are required to maintain accurate accounting records from the date of death through final distribution. A proper accounting should include:
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Receipts and disbursements of income and principal
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A list of trust assets and liabilities
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Trustee and professional compensation
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Other disclosures required by the California Probate Code
7. Communicate and Administer the Trust Responsibly
Finally, the successor trustee must administer the trust promptly and in good faith, maintaining open communication with all beneficiaries. Poor communication or delays can result in lawsuits for breach of fiduciary duty. Maintaining transparency is key to fulfilling your trustee legal obligations.
Final Thoughts
Serving as a successor trustee is both an honor and a serious legal responsibility. Following these seven steps ensures you comply with California trust administration requirements, fulfill your duties as a successor trustee, and protect yourself from potential liability.
If you’ve been named a successor trustee and need guidance on trust administration, our San Diego estate planning firm can help you navigate each step efficiently and confidently.