You just lost someone you love. Maybe it was a parent, a spouse, a sibling, or a close friend. You are grieving, and you are also trying to figure out what happens next with their estate.
If they had a living trust, and if they were smart about California estate planning they probably did, then someone has been named to take over and wrap things up. That person is called the successor trustee. And there is a good chance that person is you.
So what exactly do you have to do? And how does California trust administration actually work?
Let's walk through it.
One of the primary reasons people create a living trust in California is to spare their family from probate. California probate is a court process, and it is famously slow, complicated, and expensive. A typical California probate takes 12 to 18 months. Attorney and executor fees on a modest estate — say, a home and a brokerage account — can easily run $40,000 to $50,000 or more, all taken out of the estate before anything goes to the family.
Trust administration is not probate. There is no court, no judge, no probate referee, and no waiting in line at the courthouse. If the trust was properly set up and funded, and if the beneficiaries can behave themselves, the whole trust administration can be done without any court involvement at all. Most trust administrations take around four to six months from start to finish, and the attorney fees are a fraction of what probate costs.
That is the good news.
Trust administration is not probate, but it is not nothing either. As successor trustee, you are stepping into an important legal role. You have duties and obligations under the California Probate Code. If you don't follow the rules - even innocently, even with the best intentions - the beneficiaries can come after you personally. That is not an exaggeration.
Here is a high-level overview of what you are going to need to do.
Within the first few weeks after the death, there are several things that need to happen. You will need to order death certificates, at least ten, because banks, financial institutions, title companies, and government agencies all want originals. You will need to file the original will with the local probate court (yes, even when there is a trust, the will needs to be filed). You will need to notify the California Department of Health Care Services of the death, because Medi-Cal has a right to make a claim against the estate.
The most important early step is mailing the California Probate Code section 16061.7 Notice. This is a legal notice that must be sent to all the trust beneficiaries and all the decedent's heirs within 60 days of the date of death. The Notice informs them that they have 120 days to contest the trust. Get this one wrong or miss the deadline and it can create serious problems down the road.
You will also need to get a tax identification number for the trust, open a trust bank account, and start identifying and gathering the decedent's assets.
Once the early steps are done, the real work begins. As successor trustee, you are responsible for safeguarding the trust assets, paying the decedent's final bills and outstanding debts, and preparing the estate for distribution.
If the decedent owned real property, you will need to decide whether to sell it or transfer it to the beneficiaries. If you are selling, you will need to hire a realtor, get the property ready, and manage the sale process. If you are keeping it in the family, there are title transfer steps that need to be done correctly, and you need to know about the Propsition 19 issues for reassessment which can increase the property tax.
You will need to liquidate or transfer brokerage and bank accounts, work with financial institutions to establish inherited IRAs for the IRA beneficiaries, and consolidate funds into a trust administration account so you can track income and expenses.
All of this sounds manageable, until it isn't. Things get complicated when beneficiaries start calling you every week demanding updates, or when family members disagree about what to do with Mom's furniture, or when someone decides to hire an attorney and start poking holes in everything you do. We have seen all of this, and we have seen worse.
Before you cut the checks to the beneficiaries, you need to prepare a trust accounting. This is a document, usually a spreadsheet, that shows all the trust assets, the date-of-death values, the income, the expenses, and the proposed distribution to each beneficiary. Under California law, beneficiaries who are receiving percentage distributions (as opposed to specific bequests like "my car to my daughter") have the right to review the accounting and even challenge your figures.
You will also need to set aside a reserve for future expenses and taxes before making any distributions. And don't forget your trustee fee. You are doing real work, and California law allows the trustee to receive a reasonable fee for serving.
Once the accounting is approved, and the 120-day contest period has passed, and a waiver is signed by all the beneficiaries, you can make distributions and close the trust.
California trust administration is not just for when the last surviving spouse or individual dies. When the first spouse dies, there is often work to do as well. Many joint living trusts contain provisions requiring the trustee to allocate the trust assets into sub-trusts, commonly a survivor's trust and an exemption trust (also called a bypass trust or marital trust). These provisions were common in trusts written before 2011, when estate tax planning was a primary concern.
If your trust has these provisions, the surviving spouse (who typically becomes the successor trustee) will need to get the assets appraised, prepare a trust allocation schedule, and fund the sub-trusts properly. This is one of the areas where experienced trust administration attorneys earn their keep, because a mistake here can have significant tax consequences down the road.
Here is a mistake we see over and over again. Someone sets up a living trust, signs all the documents, pays their estate planning attorney, and then does not transfer their assets into the trust. The house is still in their personal name. The bank accounts are still titled to them individually. And when they die, their successor trustee discovers that there is nothing actually in the trust to administer.
This creates a mess. If the unfunded assets are worth more than the California probate threshold, currently $208,850, those assets may have to go through probate after all, which defeats the whole purpose of having a living trust.
The good news is there is sometimes a fix. A Heggstad Petition is a court filing that can, in the right circumstances, pull assets into the trust after the fact and avoid probate. But it is not guaranteed, and it adds cost and delay. Better to fund the trust correctly from the start.
Most successor trustees hire an estate planning attorney to guide them through the process. And most of them are glad they did. Trust administration involves legal notices with hard deadlines, tax filings, title transfers, and a lot of moving parts. An experienced California trust administration attorney can help you stay on track, avoid mistakes, and protect yourself from liability.
If you are looking for an attorney, look for one who does trust administration regularly - not as an occasional side project. And look for one who charges a fixed fee, so you know what you are getting into before you start. Billing by the hour in the middle of a grief-filled, stressful trust administration is not something you need.
No trust administration guide is complete without a candid word about family. The California Probate Code is clear. Your job is to follow the rules. What is less clear is what to do when your brother hasn't spoken to you in ten years, or when your sister thinks she should have been named trustee instead of you, or when a beneficiary hires an attorney to scrutinize every decision you make.
These situations happen. We have sat in conference rooms watching siblings yell at each other over an estate that was perfectly straightforward on paper. When family relationships break down, trust administration gets harder, slower, and more expensive. In extreme cases, the trustee may need to take the matter to the probate court for judicial supervision which ironically is exactly what the living trust was designed to avoid.
The best thing you can do in those situations is document everything, follow the rules, and get good counsel early.
At Clark Allison, trust administration is a core part of what we do. We have guided trustees through hundreds of California trust administrations: straightforward ones, complicated ones, and some that required the wisdom of Solomon.
We charge fixed fees, so you will know the cost before we start. We explain the process in plain English. We tell you what needs to be done and what doesn't. And we stay with you until the job is finished.
If you are a successor trustee in California and you are not sure where to start, give us a call. The first conversation is free.
We serve families in person in our El Dorado Hills, Roseville, San Diego, and San Luis Obispo offices, and virtually from anywhere in California.