When someone dies, the successor trustee often receives a trust binder but no reliable list of what the person actually owned.
There may be an old schedule of trust assets, scattered account statements, a house full of personal property, and assets that were never formally transferred into the trust. Family members may already be asking what they can take, when property will be sold, and how much everything is worth.
The trustee's first job is not to divide the property. It is to identify what exists, determine how each asset was owned, protect it from loss, and establish reliable values.
A complete trust inventory provides the foundation for nearly every later step of the administration, including managing property, preparing tax returns, accounting to beneficiaries, selling assets, and making distributions.
Many living trusts include a schedule listing property associated with the trust. That schedule can be useful, but it should not be treated as conclusive proof of what the trust owned when the person died.
An asset schedule may be outdated, incomplete, or describe property that the person intended to transfer but never did. It may also list an account that was later closed or omit property acquired after the trust was created.
For example, a schedule may refer broadly to “all bank and investment accounts,” while a particular account remains titled in the decedent's individual name. A house may appear on the schedule even though the recorded deed was never changed, or the house was sold years before. A retirement account may name an individual beneficiary and pass outside the trust altogether.
The trustee should therefore treat the schedule as a clue, not as the final inventory.
For each asset, the trustee should answer four separate questions:
The trustee should begin by reviewing the trust agreement, all amendments or restatements, and any attached schedules or property assignments.
The trust may identify specific gifts, describe business or real estate interests, or include special instructions concerning a residence or personal belongings. It also establishes who is entitled to receive the trust property and whether any assets must remain in continuing trusts.
The trustee should then gather records that may reveal what the decedent owned. Start with bank and brokerage statements, deeds and property tax bills, income tax returns, retirement and life-insurance records, business documents, vehicle registrations, loan records, insurance policies, safe-deposit-box information, and relevant mail or email. Files maintained by the decedent's accountant, financial advisor, estate planning attorney, or bookkeeper may fill important gaps.
Several years of income tax returns can be especially helpful. A return may reveal interest from an unfamiliar bank account, dividends from an investment account, rental income, partnership interests, business income, installment payments, royalties, or retirement distributions.
The trustee should create a single working inventory rather than keeping information in separate piles of statements, emails, and handwritten notes.
A spreadsheet or organized table is usually sufficient. For each asset, record what it is, where it is held or located, the identifying account information, the owner of record at death, whether it appears to belong to the trust, its current and date-of-death values, any related debt, post-death income, security concerns, missing documents, and the expected disposition.
This inventory becomes the trustee's working record throughout the administration.
It also helps prepare for later reporting. A trustee may eventually need to explain the trust's assets, income, expenses, sales, and distributions to the beneficiaries. That process is much easier when the trustee begins with a reliable inventory rather than trying to recreate the history months later.
The fact that the decedent used, managed, or paid for an asset does not necessarily mean the trust owned it.
The trustee should verify legal title wherever possible.
For real estate, review the recorded deed rather than relying only on the trust schedule, a property tax bill, or the decedent's files.
The deed may show that the property was held by the trustee, by the decedent individually, with a spouse or another owner, or through an LLC or other entity. The form of title can determine what happens next.
A title report may be helpful when ownership, liens, or the deed history is unclear.
Statements often identify whether an account is held in the name of the trust, the decedent individually, jointly with another person, or with a payable-on-death or transfer-on-death designation.
The financial institution may require a death certificate, certification of trust, tax identification number, or other documentation before releasing complete information.
Once an account is confirmed as trust property, the trustee will typically need to open a trust bank account to consolidate it with the trust's other liquid assets.
IRAs, 401(k)s, annuities, and life-insurance policies commonly pass according to beneficiary designations rather than through the trust.
The trustee should identify these assets but should not assume they are part of the trust. If individuals or charities are the beneficiaries — and not the trust, which is usually the case — then the beneficiaries must contact the financial institution or insurance company directly to work out the payout.
A business may be owned through corporate stock, an LLC membership interest, a partnership interest, or a sole proprietorship.
The trustee should review governing agreements and ownership records before assuming the trust controls the business or its assets.
Household items, jewelry, artwork, collectibles, vehicles, tools, and other personal property may not have formal title documents.
The trustee should still identify and document the property, especially when it has significant financial or sentimental value. Photographs, receipts, insurance schedules, and prior appraisals may help.
The immediate task is to preserve the property and create a reliable record before anyone removes or distributes it.
Once the trustee begins identifying assets, the trustee should take reasonable steps to protect them.
That does not mean the trustee must personally take possession of everything. It means preventing avoidable loss while the administration is underway.
For a residence or other real property, the trustee may need to secure the building, change locks, confirm insurance, notify the carrier of the death, maintain essential utilities, arrange necessary maintenance, monitor vacant property, and preserve rental income and tenant records.
The trustee should be careful before canceling insurance or leaving a property vacant without notifying the carrier. Coverage may be restricted when a home remains unoccupied for an extended period.
For personal property, the trustee may need to photograph the contents of the residence, secure valuables and important records, preserve vehicles, and prevent family members from informally taking items.
If property is removed, the trustee should keep a clear record of what was taken, by whom, and why.
For businesses and rental property, the trustee may also need to preserve leases, customer information, payroll records, accounting files, insurance, licenses, and ongoing operations.
The trustee should avoid irreversible decisions before understanding the ownership and value of the property. Selling, discarding, donating, or distributing an asset too early can create disputes that are difficult to resolve later.
A decedent's home may contain property belonging to a surviving spouse, an adult child, a tenant, a business, or another family member. Similarly, a jointly used account may not belong to the trust. A vehicle may have been used by the decedent but titled to a company. Equipment stored at the house may belong to a family business rather than to the decedent personally.
When ownership is uncertain, the trustee should document the issue instead of automatically treating the asset as trust property.
That may involve locating receipts, title records, account statements, business documents, or other evidence. The trustee may also need to record who claims the property and keep it secure until the ownership question is resolved.
The trustee should likewise keep trust funds separate from personal funds. Deposits, expenses, sales proceeds, refunds, and post-death income should be traceable through the trust's records.
The trustee will often need to establish an asset's fair market value as of the date of death.
Those values may affect income-tax basis, trust accounting, estate-tax analysis, proposed distributions, and the calculation of gain or loss if an asset is later sold.
The correct valuation method depends on the asset.
For bank accounts and investment accounts, the statements ending closest to the date of death will usually suffice for date-of-death values.
Real property will often require a qualified appraisal, especially when the property may be sold, distributed to one beneficiary, or reported for tax purposes. The county assessed value, an online estimate, or an informal real estate opinion may not be an adequate substitute for fair market value.
Closely held business interests may require a specialized valuation. The value may depend on income, debts, ownership restrictions, marketability, contracts, and the terms of an operating, partnership, or shareholder agreement.
Jewelry, artwork, antiques, coins, vehicles, wine, or other valuable collections may also require professional appraisal. Insurance value and fair market value are not always the same.
The trustee should focus on obtaining valuations that are appropriate for the asset and the decisions that will be made. Not every household item needs a formal appraisal, but significant or disputed property should not be valued casually.
A trust inventory is not completed once and then placed in a file.
During the administration, the trustee may discover additional accounts, receive tax refunds, collect rent or dividends, sell property, pay debts, resolve ownership questions, or learn that an apparent trust asset passes outside the trust.
The inventory should be updated as these events occur.
It is also helpful to distinguish between the initial date-of-death inventory and later activity. The initial inventory shows what existed and what it was worth at death. The ongoing records show what happened afterward.
Both are needed to prepare a clear trust accounting and explain the administration to beneficiaries.
Finding an asset in the decedent's individual name does not necessarily mean it is lost to the trust. It does mean the trustee will need to determine what procedure applies to gain access.
The answer may depend on the type and value of the asset, the title documents, the trust language and any assignment of property, beneficiary designations, available nonprobate procedures, whether a court petition is appropriate, and whether someone else claims ownership.
The trustee should identify the asset, preserve it when possible, and obtain advice before attempting to sell, transfer, or distribute it.
Additional legal, tax, appraisal, or financial assistance may be appropriate when ownership is unclear or disputed, records are missing, family members are removing property, or the administration includes out-of-state real estate, rental or commercial property, a closely held business, valuable collections, digital assets, loans, omitted assets, competing beneficiary claims, or significant tax issues.
A reliable inventory gives the trustee a foundation for every later step, including tax reporting, property management, accounting, and distributions.
If you are serving as a successor trustee and need help identifying, protecting, or valuing trust assets, we can guide you through the administration and help you determine what should happen next.
Clark Allison LLP assists successor trustees throughout California, meeting with clients in person at our El Dorado Hills and Roseville offices and virtually throughout the state. Contact us to schedule an initial trust administration call with one of our attorneys.