Administering a living or “inter vivos “ trust in California is much like probating a will. While its grantor or creator is alive, he transfers his assets into it. He can manage those assets or even liquidate the trust entirely, making it revocable. When he dies, his living trust becomes irrevocable, and the trust takes over ownership of the assets contained in it. Assets in the living trust don’t have to pass through probate because the trust itself did not die. The steps of administering the estate are much the same as when bequests are made through a will, but the court generally does not oversee the process.
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Contact the probate court in the deceased’s county. Under legislation passed in 1997, California requires that you give notice to the trust’s beneficiaries and the decedent’s heirs that the trust has become irrevocable upon the original trustee's death. A particular form is required for this notice, which you can get from the probate court. Heirs and beneficiaries have 120 days to contest the terms of the trust under California law.
Identify the decedent’s assets, both those with which he funded his trust and any he may have neglected to transfer into the trust. If he made a pour-over will, directing that assets outside his trust move into it at his death, California requires that you submit it for probate so his trust includes all his assets.
Arrange for appraisals of all assets of significant value. This is important both for tax purposes and for distribution of assets to beneficiaries. If the decedent left bequests in percentages, such as half to each of his two children, values must be determined so each beneficiary receives property of equal worth.
Transfer title of the trust’s assets from the name of the trust into your name as successor trustee. Under California law, you must have ownership to eventually transfer the assets to the trust’s beneficiaries.
Take possession of the decedent’s mail by collecting it from his residence and submitting a change-of-address form at the post office. His mail will help you identify his debts. California probate law does not require that a successor trustee notify the decedent's creditors of his death, but it can hold you personally liable for non-payment under some circumstances. Speak with an attorney about safeguarding against this.
Contact the Internal Revenue Service to get a tax identification number for the trust. Prior to his death, the decedent’s Social Security number was associated with his trust, so you must change this before you can pay taxes on behalf of the trust. Use the new TIN for both IRS and California returns.
File California and federal personal income tax returns for the decedent for his last year of life. You must also file fiduciary income tax returns for the trust, if it brings in any income after the decedent’s death, and a federal estate tax return on the value of the decedent’s assets, if they exceed the exemption amount in the year of his death. You are not required to file a California estate tax return.
Contact an attorney to figure out how much you may pay yourself from the trust for your services as successor trustee. Under California law, you may be entitled to between 1 and 1.5 percent of the trust’s value for your services, depending on the terms of the trust documents and other factors.
Make distributions to the trust’s beneficiaries after you’ve paid the decedent’s debts and taxes. This might involve establishing sub-trusts to hold assets not distributable to minors until they reach the age of majority or to accommodate other terms of the trust documents.
Tips & Warnings
If the decedent received Medi-Cal benefits, you might have to reimburse the state from his trust after his death. Contact the California Director of Health Services to find out if you're not sure.
References & Resources
- Tredway, Lumsdaine & Doyle: Beginning Trust Administration
- State Bar of California: How to Avoid Probate in California
- R. Anthony Bauman: Living Trust Administration After Death of an Owner
- Toews Law Office: Settling the Revocable Trust in California (PDF)
- California State Controller’s Office: Filing Requirements for California Estate Tax Return
- The Free Dictionary: Inter Vivos Trust
- Comstock Images/Comstock/Getty Images