How to Administer a California Living Trust

By Bryan Driscoll, J.D.

How to Administer a California Living Trust

By Bryan Driscoll, J.D.

Many people mistakenly believe trusts are only for the wealthy. However, this could not be further from the truth. Trusts are a great way to pass money, family heirlooms, and other assets to your heirs without the hassle and expense of probate. Living trusts are one way to avoid the expense and time drain of probate.

Man holding pen and paperwork with his hand on his foread

What is a Living Trust?

Similar to a will, a living trust is a document created by a grantor during their lifetime, and lays out instructions on how their assets should be distributed after death. The biggest difference between a will and a living trust is that a will only becomes effective after the grantor dies. A living trust, on the other hand, becomes effective the moment the grantor signs the document.

When the living trust becomes effective, the grantor is both the initial trustee and beneficiary. This means they manage all of the assets for their own benefit. The assets will comprise everything they own once they have transferred title into the name of the living trust. When the grantor dies, the successor trustee will continue to manage the trust according to its terms.

Administering a Living Trust in California

Administering a living trust in California is a straightforward process that doesn't involve probate court, thereby reducing the amount of time and expense required to distribute assets.

When the grantor dies, the living trust automatically and instantly becomes an irrevocable trust. This means that no further modifications can be made and the successor trustee will distribute assets to heirs as laid out in the trust.

Contact the probate court

This may sound counter-intuitive because a living trust need not go through probate. But California requires that a successor trustee provide notice to the beneficiaries of the trust and any heirs of the decedent.

The successor trustee must provide notice that the trust has become irrevocable. Under California law, beneficiaries and heirs have 120 days to contest the terms of the trust.

Compile assets

This is the step where probate may become necessary. A trust only contains the assets and possessions that the grantor of the trust titled in the trust's name. If the grantor dies with assets purchased as individual and never transferred title to the trust, it will require probate.

Compiling the assets of the decedent helps determine if probate is necessary. If the decedent provided a pour-over will, California law requires that the will is probated before those assets are transferred into the trust.

Appraise assets

The successor trustee must have all items of value appraised. This is important both for tax purposes and for proper distribution to trust beneficiaries.

If the trust laid out percentage distributions, the successor trustee must determine the value of all assets to properly distribute the required percentage of the trust to each beneficiary. This is usually done by hiring an appraiser to give an accurate value for each item.

File taxes

This is the favorite part of no one. We all dislike filing our own taxes. Now, as successor trustee, you're required to file final income taxes for the decedent.

To pay final income taxes, you must obtain a tax identification number (EIN) for the trust. When set up, the trust is associated with the decedent's social security number. The successor trustee must change this to a new tax identification number to pay federal and California state tax returns.

Pay yourself and beneficiaries

As the successor trustee to the trust, you are entitled to payment. An experienced California trust attorney should be consulted on this topic.

The successor trustee must also make distributions to trust beneficiaries. You must complete all of these distributions in accordance with the terms of the trust. As a result, this may require you to set up additional trusts to hold funds for minor beneficiaries.

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