Trusts are a common tool used in the estate planning process. The big question is: what is the process of California trust administration at that time? It’s a good question. Knowing the answer now can help put you (your beneficiaries and even your named Trustee if you’re not using a lawyer or financial planner for that position) at rest.
Related: Thinking about a Living Trust in California? Here Are Some Things You Should Know
The Steps Involved in California Trust Administration
After your death, there are several steps that must take place to administer a trust. The goal of the trust is to provide for others after your death. This requires proper administration to preserve the assets. Although we’re going to list out the steps involved, you should at least consider getting help from your estate planning attorney to create the process for the Trustee you named or talk to your attorney about hiring a professional Trustee.
Sending out the mandatory notices. The Trustee must send out mandatory notices about your death and when the California trust administration will begin. The notices must be sent to every creditor and every beneficiary and heir. Both creditors and heirs have a certain amount of time that they can file a claim or object. If they do not file their claim or object before the deadline, they may be prevented from making a claim or further objecting.
Transferring titles to real property owned by the trust to the Trustee. This is done so that the new Trustee may follow your wishes as to how that property should be handled. This requires both an affidavit of death of Trustee (you) as well as a certified copy of the death certificate. These items will be needed for every piece of real property. So, if there are five pieces of real property owned by the trust, your new Trustee will need five of those completed affidavits as well as five certified copies of the death certificate. Then, the new Trustee may begin the process of transferring the title. Depending on the type of property and the trust, there may be other documents to help exempt the property from property tax. A lawyer is very helpful during this process.
Settling debts. The Trustee will settle all of your debts. This includes credit cards, medical bills and expenses, and both state and federal taxes. Depending on your situation, the Trustee may also be required to reimburse the State for Medi-Cal. This potential step can quickly get complicated. It is very important for your named Trustee to get appropriate expert guidance.
Related: Medi-Cal Recovery and Estate Planning: What You Need to Know
Create and maintain a detailed accounting of the trust. This step takes place throughout the entire California trust administration process. The Trustee must create and maintain a detailed accounting for the trust. Some of the tasks include how trust funds are used for things such as final expenses, probate expenses, and taxes. They must also provide an accounting for all of the activities related to the trust (including both deposits and withdrawals).
Distribute the remaining trust. The remaining trust does not get distributed to heirs or beneficiaries unless and until all debts are satisfied (including taxes and probate expenses). Sometimes there isn’t enough remaining in a trust to provide to the beneficiaries as directed in the will and trust documents. When this happens, beneficiaries may receive a pro rata distribution of what is left.