As the named successor trustee you may be called upon to step in if the person who created the trust becomes incapacitated. Your role in that case is to protect the trust assets and ensure they are used solely for the benefit of the trust creator, also referred to as the Trustor or Settlor. Alternatively, you may not be called to serve until the Trustor passes away. Your role in that case is to protect the trust assets and ensure they are distributed to the named trust beneficiaries.

You will need to provide notice to the beneficiaries named in the trust, as well as the Trustor’s family that you have stepped into your role as Trustee. There is a specific process for doing this under the Probate Code and there is a timeline attached to this. You should also be ready to answer the beneficiaries questions, particularly if the Trustor has died and they are entitled to distributions. You should immediately sit down with your attorney and CPA to discuss what information should be provided and to learn more about the process of administering a trust so you are confident about your role when you begin to communicate with the beneficiaries.

You will need to check to make sure the Trustor has filed all prior year’s tax returns and if he or she has not, you are obligated to file those. Your CPA will know how to access tax records and take care of the paperwork. In the case of a deceased Trustor, you will need to file their final State and Federal personal income tax returns. If the trust earns income during the time you are serving as trustee, you will also need to file “fiduciary” income tax returns and pay the tax on that income.

A Trust Accounting has a specific format, that is quite different from accountings prepared for businesses. The Probate Code contains instructions about how the account needs to be organized and what specific information needs to be included. It may be tempting to provide a more informal accounting to the beneficiaries, especially when they tell you they do not need a formal accounting or do not want to pay for one. However, having a code compliant accounting is beneficial because it’s clear how the trust assets have been managed and, if a troublesome beneficiary decides to complain to the court about something, your accounting will be ready to file with the court promptly and you will not need to do extra work.

Upon learning that you need to step in and fulfill your role as successor trustee, you must educate yourself and that will require a team approach. At a minimum, you will need an attorney and a CPA with actual experience in trust administration. Ideally, your team will provide you with guidance so you understand your role, avoid mistakes and perform your duties efficiently. Attempting to do this job without sufficient support can get you into serious legal trouble. You will need to sign a form acknowledging your understanding of your duties and obligations and accepting the responsibility as trustee. You are NOT forced to serve if you do not feel up to the task. The trust document either names additional successor trustees or provides a method of having them appointed.  

You may need to work with your team to get an IRS Tax Identification Number and open one or more trust bank accounts. If accounts are already in existence you will need to document your authority, and your attorney can prepare the necessary paperwork. Once that has been accomplished, you will need to take control of the trust assets.There are 3 types of property that a trust can hold: Real Property (land, houses, timeshares); Intangible Personal Property (cash and investments, as well as the right to be paid money under a contract); and Tangible Personal Property (physical items that you can touch).

Marshalling Real Property involves changing title from the former trustee to yourself, as trustee. This is commonly accomplished by filing the necessary documents with the County Recorder’s Office where the Real Property is located. Marshalling Intangible Personal Property usually involves changing title to bank accounts or investment accounts held in the name of the former trustee. Again, you will hold title to these assets as trustee, not in your own name.

Most Tangible Personal Property do not have any ownership documentation like title to land or a bank account, however vehicles will have ownership documents. Depending on your role, you may change title to vehicles or you may simply sell them and deposit the proceeds in the trust bank account. You will create a master list of every asset owned by the trust. If you are stepping in after the Trustor’s death, you will need to obtain appraisals for non-cash assets.

As soon as creditors are aware of the Trustor’s death, his or her creditors will attempt to learn who the new trustee is or who the executor is. You should have the decedent’s mail forwarded to you and begin the process of identifying creditors who need to be paid. If you are unsure whether a request for payment is valid, you should respond by asking for the creditor to provide proof of the validity of the claim. If you refuse to pay a claim because you believe it to be fraudulent, the creditor must then follow a multi-step legal process to pursue the claim.

Because it takes time - 8 to 12 months or more - to complete the administration of a trust after the death of the Trustor, beneficiaries can become impatient and demanding. Some may decide to file a petition in the Probate Court accusing you of failing to fulfill your duties as Trustee.

The best thing you can do to prevent this is to meet with your attorney and CPA as soon as possible and create a plan for the administration. Then you will need to share that plan with the beneficiaries, and probably answer repetitive questions from them. You will also need to keep detailed records of your work as trustee. This means keeping a log showing the date, action, purpose and time spent.

If you are a beneficiary yourself, you may not want to charge for your efforts, but depending on how the other beneficiaries act you may change your mind. Even if you do not charge for your work, a time log is an excellent way to demonstrate that you have been systematically doing the work required to administer the trust.