A close family member or friend has chosen you to be his or her successor trustee upon their death. It’s an honor; based on love, trust and their belief you are the best person for the job. But do you really want the job? To be honest, most of our clients are related to the original trustee who died. Usually a child or sibling. If you are having challenges managing your time, or if there is significant geographic distance between you and the trust property and/or beneficiaries, or you don’t get along with one or more of the beneficiaries, you might think twice about accepting the position. No one will be happy if you take on the job but fail to provide what is legally required by the trust. If there are beneficiaries with whom you don’t get along, that is a wild card best approached with caution.

Of course you can always resign after you have accepted the position. However, it’s harder to do so once the mechanisms have been set in place for your trust administration. And, during your administration duties, you may have opened yourself up to potential liability from a disgruntled beneficiary.

What does a trustee do? A settlor who creates a trust, agrees to transfer the property to a trustee who will manage that property to another, called the beneficiary. The trust, in the person of the trustee, becomes the new legal owner, and the trustee becomes the new manager. Usually, while living, the settlor is the first trustee and beneficiary. When the settlor dies (or becomes incapacitated), the next trustee, called the successor trustee, steps up to manage and distribute the trust assets. That’s you, if you accept the job.

Once you accept the job as successor trustee, it is your job to manage and if required, distribute them as well. By using you as the successor trustee, the settlor’s assets can be distributed to the people who inherit them directly without involving the probate court. That saves time and money. If the trust is designed to stay in existence a while, it can also provide a way to manage assets for young beneficiaries. In other words, if the successor trustee distributes the assets shortly after the settlor dies, you have a simple trust to administer. If however, the trust says you are to hold on to the trust assets for the intended beneficiaries, manage those assets and make periodic distributions, you have a more complicated trust.

For example, if the trust may have been created to provide for young children until they grow up, or in trust for other family members indefinitely. This might entail you, as the successor trustee, to file tax returns, perhaps invest the trust assets, or choose how to distribute the trust funds to the beneficiaries. You may in fact be wearing your successor trustee hat for a long time.

Another factor you might consider: is there a cotrustee. I would suspect that the settlor named you and someone else as successor cotrustees in the hope that your skills would complement each other and that working together you two together would make a perfect trustee. Or perhaps the settlor didn’t want to hurt anyone’s feelings. The truth is that when you work with someone else, you may have more obstacles that when working alone. One common problem that we face at East Bay Probate & Trust Administration, is when one successor cotrustee does the vast majority of work while the other successor cotrustee does far less. Not only does this place a heavy burden on the one successor cotrustee, but more importantly, the successor trustee who is working far less, may not realize or accept that you are doing most of the work. When it comes to payment, they may want to split the trustee fee in half equally. Also, you might legally be liable for your successor cotrustee’s negligence. For example, if your successor cotrustee promises to file the trust tax return but doesn’t, both of you will be on the hook.

Before you sign on for the job, take a moment to consider whether you’ll be working with the legacy of an organized person or someone who has left piles of papers and records stacked throughout their house, with no apparent rhyme or reason to their filing process. One of your threshold jobs as successor trustee will be to identify and collect assets. It can be easy if the settlor left good records. Or it can be a nightmare, if the settlor left you with a house of seemingly random piles of paper. At a minimum, you’ll be searching through account statements, looking at the settlor’s mail and going over old tax returns.

You may be dealing with beneficiaries for a few months or for several decades, depending on the trust terms. A long term trust can be fraught with problems. And even a short term trust can be challenging if the beneficiaries don’t like what you are doing. If the beneficiaries are unhappy, they can demand frequent accountings, ask a court to remove you as successor trustee or sue you for violation of your legal duties to them. If the beneficiaries are not happy with their share of the trust (they never think they received too much), you’ll be the one they complain to, perhaps over and over again. But remember, you must put the interests of the trust beneficiaries before your own. The trustee serves the trust.

What about getting paid? The trust document oftentimes will state if the successor trustee gets paid for their work and if so, how much. But if you are both the successor trustee and the intended beneficiary, you may not want to get paid. Why? Because if you take part of the trust assets as a fee for your services, you will have to pay income tax on those fees. If however, you decline the payment and receive all the trust monies through your inheritance, you pay no income taxes on inherited money. Lastly, if you seek a fee for your work, and you have siblings, they may feel your work is part of your obligation to the family and its unfair for you to take a fee while working on the “family” trust.

Remember, you won’t be on your own. As the successor trustee, you can hire professionals, advisors and accountants. This is exactly what we do at East Bay Probate & Trust Administration. We help guide successor trustees in the oftentimes turbulent waters of family dynamics and wealth distribution. You will not have to pay for professional support yourself, rather, the trust assets can be used to pay for those services.

As you can see, the duties of a successor trustee can be relatively simple or unpleasantly complex. Either way, if you take one step at a time in the right direction as you are administering the trust, coupled with the guidance of a seasoned professional providing advice, your journey as successor trustee will fulfill the wishes of the original settlor and provide for an orderly distribution of the trust assets.

We at East Bay Probate and Trust Administration are here to help Trustees and Successor Trustees manage their legally required duties and responsibilities. A loved one or a family member has chosen you to administer their living trust. We help our clients manage their job duties as Trustees, carry out the last wishes of the Settlor, manage the estate, pay outstanding debts, engage in business transactions, pay taxes and distribute money or property to family, friends or charity. If you are seeking help on how to be a Successor Trustee and how to get it done properly with a minimum of drama, we can help you.

A Successor Trustee’s job is to manage trust assets and then distribute those assets as the trust document directs. We help our clients understand the trust document and its requirements, explain what the trust says and requires, the rules of dealing with trust beneficiaries, and how to administer trust properties. When reviewing the trust document, we identify issues that may make your job as Successor Trustee especially difficult such as real estate transactions or complicated distribution procedures.

Generally, a trust document will allow the Successor Trustee to be paid. Many trust documents indicate that a Successor Trustee may make a reasonable fee for their services. What is a reasonable fee? In our experience, the fee usually averages between .75% and 1.5% of the total trust assets, depending on the complexity and size of the trust.

We help our clients keep the beneficiaries informed. Beneficiaries are less likely to become upset or ill-tempered if they receive regular communications as well as notification of any significant transactions. We help our clients educate the beneficiaries on the Successor Trustee’s duties and responsibilities. Sometimes we advise our clients to hold a family meeting to help the beneficiaries understand what is being done by the Successor Trustee and why? Email can be an effective way to communicate with the beneficiaries while leaving a paper trail that might protect you down the road. Regular communication can avoid problems down the road. Should spouses be included in these family meetings? Of course it depends on the family but oftentimes we recommend that only blood relatives and direct beneficiaries attend.

Depending on the trust terms, Successor Trustee may be obligated to provide an accounting to the beneficiaries which includes; how the trust income and principal has been spent, trust assets and liabilities, compensation paid to the Successor Trustee, money paid to attorneys, CPA’s and advisors. This brings us to the next issue many of our clients face. Whether or not to hire a professional.

As a Successor Trustee, you are not expected to be a master of all trades. Prudent trustees will seek professional help for trust matters that are difficult, specialized or complex. Of course, you must be thoughtful in whom you choose and its best practices to oversee what the professionals are doing and the decisions they are making.

When a Settlor dies, the Successor Trustee needs to send a special notice to the beneficiaries that the Settlor has died. California law requires that the Successor Trustee send notice within 60 days after the Settlor’s death. As for a copy of the trust, California Probate Code 16061.7 states that beneficiaries and heirs also have a right to a copy of the terms of the trust if they ask for it. California law gives the beneficiaries 60 days after receipt of the trust instrument to file a lawsuit contesting the trust.

What are some of the tasks that need to be performed after the Settlor dies? First there is the need to get certified copies of death certificates. Many banks, mortgage companies and institutions require a certified certificate. Often times there is a will as well as a trust. The original will must be deposited in the probate court in the county where the Settlor resided. If the Settlor was receiving Social Security, a call to Social Security at 800-772-1213. We suggest that our clients move with all due speed as not only must payments received after the Settlor’s death be returned to the government, but the payment that was made during the month that the Settlor died must also be returned. If the Settlor received Medi-Cal and died owning a home, the agency may have a claim on the Settlor’s home. If pension payments are being made, the issuing institution must be notified of Settlor’s death. However, if there is a surviving Settlor, those pension payments may or may not cease.

We suggest our clients go through the deceased Settlor’s mail as well as go on-line to the United States Post office to get the address changed and mail delivered to the Successor Trustee’s home. There will be a need to gain access to decedent’s bank and investment accounts. Perhaps contacting the former accountant to determine if any taxes are due and owing. It may be helpful to look at property tax statements to identify all of Settlor’s property. It may be necessary to go through decedent’s home with a fine tooth comb, looking in shoeboxes or desk drawers to see what property can be discovered. In other words, it’s important to know everything the Settlor owns.

If the Settlor had valuable household furniture, jewelry, art, rugs or anything of significant value, an inventory of the household belongings may be wise. Not only is a written list essential, but photographs of items can nicely augment a written list. You might also consider contacting former employers to see if the decedent is entitled to any benefits. When it comes to real estate, it may be warranted to hold on to the property or sell it depending on the terms of the trust. However, if it is decided to hold on to the property, it’s wise to notify the insurance carrier so the Successor Trustee can be placed on the policy.

Apply for a social security number? Yes, once the trust becomes irrevocable, the Successor Trustee must apply for an EIN number (employer identification number, even though the trust has no employees) so the trust has its own social security number. We recommend that this is done even if the trust property will be distributed quickly and the trust will terminate shortly after the Settlor’s death. The Successor Trustee will need the EIN number to open a bank account or other financial transactions in the trust’s name. If the trust property receives income, it is best to transfer the property to the Successor Trustee and have the trust EIN number in place so the accountant can properly charge the income under the trust’s taxpayer ID number.

As for real estate, a notice of the death of the Settlor and concurrently file a certified death certificate will be needed. We recommend that the Successor Trustee contact the Recorders office to determine if there are any other documents that need to be filed. It’s also important to get all real estate assets appraised near the time when the Successor Trustee takes over the trust. Why? Because the tax “basis” of the property will be raised to the value of the property at the date of death of the Settlor, which may have important consequences for potential capital gains taxes. In addition, an appraisal may help in determining the value so a more accurate distribution of assets can take place.

When it comes to brokerage accounts, the Successor Trustee can use the brokerage statements to determine the number of shares of stocks or mutual funds owned at the date of death. It is sometimes possible to ask someone at the brokerage house to help determine the portfolio value at the date of death.

What about debts and creditor’s claims? First and foremost, beneficiaries should not receive any money or property from the trust until all debts have been resolved. Look at bank statements to determine if any automatic withdrawals need to be discontinued. If the value of the real property is less than the encumbrances, some thought should be given to not making any further mortgage payments. Credit card bills are not the responsibility of surviving family members.

Transferring title to vehicles? The DMV has an affidavit the Successor Trustee can use to transfer the vehicle to the trust and then the Successor Trustee can transfer the vehicle to the beneficiary. If the Settlor filed a Transfer on Death (TOD) with the DMV, the vehicle automatically gets transferred to the identified beneficiary.

Feeling overwhelmed after reading this article or with the duties of a Successor Trustee? It’s understandable as trust administration is not an activity one does with any frequency except for perhaps attorneys’ whose work involves trust administrators. Regardless of whom the Successor Trustee hires, keep in mind that it is the Successor Trustee, not the attorney that is responsible for trust assets. However, most trusts allow for Successor Trustees to hire attorneys to help them administer the trust. Nearly all trustees run into some problems such as disgruntled beneficiaries, a real estate agent who is not familiar with selling trust property or even an interpretation of the trust itself. We at East Bay Probate and Trust Administration are here to help. To get started, we offer a free 30 min consultation to Successor Trustees to provide answers to their questions, identify issues, as well as to determine if we are a good fit to work with going forward. We look forward to hearing from you.