The Trustee’s Duties upon Death of the Grantor
Reading of Documents
Affidavit
Appraisal of Trust Assets
Information of the Beneficiaries
Transferring Property to the Beneficiaries
Long Term Management of a Trust
Preparing and Filing of Tax Returns
Reading of Documents
Once a trustee has accepted trusteeship, he or she will be in charge of the trust. From this point the trustee starts to accomplish his mission.
The first step a successor trustee has to do, once he receives the trust document is to read it thoroughly. The reason for this is the high flexibility of living trusts. As outlined before, no trust is alike and so differ the duties of the trustee from case to case.
Therefore in order to determine his duties the trustee must study the trust document.
From my experience as a Californian trust attorney in most cases there are similar steps and duties to be followed by the successor trustee.
Affidavit
In order to be able to act for the trust, the successor trustee must obtain proof of his position and his powers. There is only one little problem that comes with it. Because the execution of a trust is in general not controlled by a court, there is no fixed legal procedure of how to obtain such a document.
Therefore the successor trustee has to draft a document, that states his position. This document is widely known as “Affidavit of Assumption of Duties by Successor Trustee” (sometimes simply “Acknowledgment of Trusteeship”). With the affidavit the successor trustee also accepts being a trustee and therewith waives the right to reject trusteeship.
In some states it is convention to register such a document with the County’s recorders office. In addition sometimes it is advised to attach a certified copy of the grantor’s death certificate to the Affidavit. In my opinion, that can’t hurt.
Appraisal of Trust Assets
One of the first things, a trustee has to do is to appraise all the major assets of the trust. This is mainly for tax reasons and secondly also good for the beneficiaries because they will then know what they’re getting. The beneficiaries might also need the price of the major assets to determine a taxable profit or a potential deductable loss in property value that might occur after the grantor dies.
The appraisal of assets can sometimes be very difficult, because certain assets have no price tag. For example usually the value of a house can only be estimated until it is actually sold. Unless the trustee is a real estate specialist, he might need the help of an expert to determine the value of a house. The same might apply to other assets. Some assets are easy to asses though. If the grantor had e.g. stock certificates, the market price on the day of death can simply be taken from the daily newspaper. Other assets might evidently not cover the costs for a specialist appraiser. In these cases the trustee might estimate the value based on common sense.
Information of the Beneficiaries
Usually the trust document requires the trustee to provide basic information about the current state of the trust to the beneficiaries. The information duty might – depending on the trust document – for example stipulate, that the trustee has to inform the beneficiaries about some form of action that he or she wants to undertake.
Besides the legal obligation it is always a good idea for the trustees to keep a good relationship with the beneficiaries. This is also wise for the trustee because it can avoid arising conflicts from the very starting point on.
Transferring Property to the Beneficiaries
Some trusts only require the trustee to serve for the short period that is needed to distribute all the trust assets to the designated beneficiaries. In this case the duty of the trustee is restricted to this. The trustee is obligated to distribute the trust assets right away and is not entitled to hold property for an extended period of time. Furthermore in this situation it is rarely necessary that the trustee sells any property to get cash. Usually all there is to do for the trustee is to transfer the property to the designated beneficiaries.
In shared living trusts it is usually the surviving spouse’s job to distribute the property of the deceased. In the usual constellation the surviving spouse’s living trust will receive most of the assets. Thus there won’t be much transfer work to do for the surviving spouse. The property – according to a popular clause – usually simply changes ownership from the original shared living trust to the new living trust of the surviving spouse. Only if the original trust stipulates to distribute parts of the decedents estate to a different beneficiary, the spouse as trustee has to ensure the proper distribution of that specific piece of property.
If the surviving spouses wishes to adjust the formal title of the respective property to the new ownership (surviving spouse as trustee of a living trust) a formal transfer is necessary like it’s been outlined above.
In general it can be said that the practicalities of property transfer are the same for the successor trustee as they had been for the former grantor/trustee of the living trust. Therefore all I mentioned before regarding the funding and defunding of a living trust applies here as well: The trustee can simply hand over property without document of title to the designated beneficiaries. The trustee also has the power initiate a change of title for other property. In this context the trustee will frequently require the aforementioned Affidavit of Assumption of Duties by Successor Trustee.
Long Term Management of a Trust
If the terms of the trust provide a longer management period for the trust property the fiduciary duties of the trustee become more important. Often this happens when the grantor has left property to minors or if the grantor himself becomes incapacitated. In that case the assents are not to be distributed right away.
Therefore it is the obligation of the trustee to take reasonable care of the trust assets and manage them according to the terms of the trust. The fiduciary duties might be specified in the declaration of trust. Often common or statute law influence the trustee’s duties as well. If you need further advice in this matter the lawyers of Rinne Legal in San Francisco, Sacramento, Walnut Creek, Fairfield and Oakland will be able to help and assist.
Preparing and Filing of Tax Returns
One very important duty of the trustee is his responsibility to file due tax returns. A trustee must consider and check the applicability of any federal or state tax the grantor or the trust might owe. Specifically a trustee may (depending on state and federal law) have to file a tax return for
Unless the successor trustee is a tax professional, often the successor trustee will be overstrained with the tax returns. However most trusts allow the successor trustee to engage a tax adviser and pay him or her out of the trust’s funds. As a San Francisco trust attorney I usually advise successor trustees to make use of this power.
Otherwise a faulty tax return might result in a breach of the fiduciary duties of the trustee, that – in the worst case – could lead to a lawsuit against the trustee himself.
Affidavit
Appraisal of Trust Assets
Information of the Beneficiaries
Transferring Property to the Beneficiaries
Long Term Management of a Trust
Preparing and Filing of Tax Returns
Reading of Documents
Once a trustee has accepted trusteeship, he or she will be in charge of the trust. From this point the trustee starts to accomplish his mission.
The first step a successor trustee has to do, once he receives the trust document is to read it thoroughly. The reason for this is the high flexibility of living trusts. As outlined before, no trust is alike and so differ the duties of the trustee from case to case.
Therefore in order to determine his duties the trustee must study the trust document.
From my experience as a Californian trust attorney in most cases there are similar steps and duties to be followed by the successor trustee.
Affidavit
In order to be able to act for the trust, the successor trustee must obtain proof of his position and his powers. There is only one little problem that comes with it. Because the execution of a trust is in general not controlled by a court, there is no fixed legal procedure of how to obtain such a document.
Therefore the successor trustee has to draft a document, that states his position. This document is widely known as “Affidavit of Assumption of Duties by Successor Trustee” (sometimes simply “Acknowledgment of Trusteeship”). With the affidavit the successor trustee also accepts being a trustee and therewith waives the right to reject trusteeship.
In some states it is convention to register such a document with the County’s recorders office. In addition sometimes it is advised to attach a certified copy of the grantor’s death certificate to the Affidavit. In my opinion, that can’t hurt.
Appraisal of Trust Assets
One of the first things, a trustee has to do is to appraise all the major assets of the trust. This is mainly for tax reasons and secondly also good for the beneficiaries because they will then know what they’re getting. The beneficiaries might also need the price of the major assets to determine a taxable profit or a potential deductable loss in property value that might occur after the grantor dies.
The appraisal of assets can sometimes be very difficult, because certain assets have no price tag. For example usually the value of a house can only be estimated until it is actually sold. Unless the trustee is a real estate specialist, he might need the help of an expert to determine the value of a house. The same might apply to other assets. Some assets are easy to asses though. If the grantor had e.g. stock certificates, the market price on the day of death can simply be taken from the daily newspaper. Other assets might evidently not cover the costs for a specialist appraiser. In these cases the trustee might estimate the value based on common sense.
Information of the Beneficiaries
Usually the trust document requires the trustee to provide basic information about the current state of the trust to the beneficiaries. The information duty might – depending on the trust document – for example stipulate, that the trustee has to inform the beneficiaries about some form of action that he or she wants to undertake.
Besides the legal obligation it is always a good idea for the trustees to keep a good relationship with the beneficiaries. This is also wise for the trustee because it can avoid arising conflicts from the very starting point on.
Transferring Property to the Beneficiaries
Some trusts only require the trustee to serve for the short period that is needed to distribute all the trust assets to the designated beneficiaries. In this case the duty of the trustee is restricted to this. The trustee is obligated to distribute the trust assets right away and is not entitled to hold property for an extended period of time. Furthermore in this situation it is rarely necessary that the trustee sells any property to get cash. Usually all there is to do for the trustee is to transfer the property to the designated beneficiaries.
In shared living trusts it is usually the surviving spouse’s job to distribute the property of the deceased. In the usual constellation the surviving spouse’s living trust will receive most of the assets. Thus there won’t be much transfer work to do for the surviving spouse. The property – according to a popular clause – usually simply changes ownership from the original shared living trust to the new living trust of the surviving spouse. Only if the original trust stipulates to distribute parts of the decedents estate to a different beneficiary, the spouse as trustee has to ensure the proper distribution of that specific piece of property.
If the surviving spouses wishes to adjust the formal title of the respective property to the new ownership (surviving spouse as trustee of a living trust) a formal transfer is necessary like it’s been outlined above.
In general it can be said that the practicalities of property transfer are the same for the successor trustee as they had been for the former grantor/trustee of the living trust. Therefore all I mentioned before regarding the funding and defunding of a living trust applies here as well: The trustee can simply hand over property without document of title to the designated beneficiaries. The trustee also has the power initiate a change of title for other property. In this context the trustee will frequently require the aforementioned Affidavit of Assumption of Duties by Successor Trustee.
Long Term Management of a Trust
If the terms of the trust provide a longer management period for the trust property the fiduciary duties of the trustee become more important. Often this happens when the grantor has left property to minors or if the grantor himself becomes incapacitated. In that case the assents are not to be distributed right away.
Therefore it is the obligation of the trustee to take reasonable care of the trust assets and manage them according to the terms of the trust. The fiduciary duties might be specified in the declaration of trust. Often common or statute law influence the trustee’s duties as well. If you need further advice in this matter the lawyers of Rinne Legal in San Francisco, Sacramento, Walnut Creek, Fairfield and Oakland will be able to help and assist.
Preparing and Filing of Tax Returns
One very important duty of the trustee is his responsibility to file due tax returns. A trustee must consider and check the applicability of any federal or state tax the grantor or the trust might owe. Specifically a trustee may (depending on state and federal law) have to file a tax return for
- Federal estate tax (due nine month after the grantor’s death)
- State law inheritance tax
- Federal income tax for the deceased grantor (final tax return, usually due on April 15 of the year that follows the grantor’s death)
Unless the successor trustee is a tax professional, often the successor trustee will be overstrained with the tax returns. However most trusts allow the successor trustee to engage a tax adviser and pay him or her out of the trust’s funds. As a San Francisco trust attorney I usually advise successor trustees to make use of this power.
Otherwise a faulty tax return might result in a breach of the fiduciary duties of the trustee, that – in the worst case – could lead to a lawsuit against the trustee himself.
