Probate Trusts
To read more about the law on a Trustee’s powers, refer to the California Probate Code .
- Do what the trust document says as long as it is legal;
- Do only things that benefit the beneficiaries;
- Not favor one beneficiary over another;
- Avoid conflicts of interest with the beneficiaries
- Never use trust property or the trustee's powers for personal benefit, unless the trust authorizes it;
- Keep trust property separate from property owned by anyone else;
- Not delegate to others anything they can reasonably do themselves (if the trustee must delegate some duties, s/he must supervise what the delegated person does);
- Administer and invest the assets of the trust with reasonable care and skill to protect the trust and to accomplish the purposes of the trust as determined from the trust instrument;
- Diversify investments unless under the circumstances it would not be prudent to do so;
- Keep detailed records and give periodic reports and/or accountings to the beneficiaries as required by California law. See Probate Code Sections 16060 - 16069 and What does a trustee need to do when the settlor dies? When the settlor dies, the trustee has other duties: Written Acceptance of Trusteeship and/or Certification of Trust: If the settlor was acting as trustee of his or her own trust, the new trustee (called a “successor trustee”) should sign an Acceptance of Trusteeship confirming that he or she has accepted his or her nomination by the settlor to act as the successor trustee. A successor trustee may also find it helpful to sign a Certification of Trust under
- The settlor's name and the date the trust was signed;
- The name, address and telephone number of each trustee of the trust;
- The address where the administration of the trust will take place;
- Any additional information the trust document might require;
- That the recipient can ask for and receive from the trustee a complete copy of the trust; and
- That the recipient has a deadline of 120 days after receiving the notice, or 60 days after a copy of the trust is mailed or served upon the recipient, whichever is later, to start a legal action to object to the trust.
For more information, see California Probate Code Section 16061.7.
Notice to Assessor's Office: If the trust property includes real estate or a manufactured (e.g. mobile) home that is subject to property taxation in California, the trustee must give written notice to the Assessor's Office of the county where such property is located within 150 days of the settlor's death.
For more information, see California Revenue and Taxation Code Section 480(b).
Notices to Victim Compensation Board and Director of Health Services: If the settlor may have received health care benefits from the State of California (e.g., from Medi-Cal), the trustee must give written notice of the Settlor’s death to the Director of Health Services within 90 days after the settlor’s death (Probate Code Sections 16062-16064 .
Follow trust instructions: The trustee also must do anything the trust instructs (unless what is instructed might be against the law). Often, the trust says the successor trustee will take care of paying for the settlor's funeral expenses, and the settlor's outstanding debts (like, recent medical expenses and credit card bills), and then distribute what is left to the beneficiaries of the trust.
Sometimes, the beneficiaries have the right to get most or all their inheritance through the trust within days or weeks of the settlor's death.
In other cases, the trustee may delay distributing property in order to:
- Sell property to pay the settlor's final bills or taxes,
- Calculate the distribution required by the trust, or
- Determine if there will be other debts or taxes to pay at a later date.
Some trusts say the trustee cannot distribute the assets for a certain number of years, or until the death of someone else. In these cases, the trustee is responsible for investing the assets of the trust, perhaps making periodic distributions to the beneficiaries (if allowed or required by the trust), until all assets of the trust are distributed to the beneficiaries.
Attend to Tax Issues: Unless there is a court appointed executor of the settlor’s estate (e.g., in order to administer assets that the settlor did not have in his or her trust), as mentioned above, the trustee will be responsible to evaluate whether any estate tax returns are required to be filed, and to make sure that they are properly and timely prepared and filed, and that any estate taxes owing are paid within 9 months of the settlor’s death.
In addition, the trustee will likely have the duty to ensure that the settlor’s income tax returns (e.g., final State and Federal income tax returns for the calendar year during which the settlor died) are duly filed and prepared, and that any income taxes due are timely paid. Further, the trustee will need to arrange for the preparation and filing of the trust’s income tax returns to properly report income that was earned after the settlor died and before the trust assets are all distributed out to the beneficiaries.
Incident to doing this it will usually be necessary to apply for and obtain a new tax ID number for the trust from the IRS (kind of like a “social security number” for the trust). That number should be given to the financial institutions holding the trust’s assets so that each financial institution will ultimately report the interest and dividend income on the trust’s tax ID number (instead of, for example, the settlor’s or the successor trustee’s social security number).
- The right to receive notice of the existence of the trust.
- The right to receive a copy of the trust.
- The right to receive trust accountings and information about the beneficiary's interests in the trust.
- The right to enforce the terms of the trust and to hold the trustee accountable for any wrongful acts or omissions that affect that beneficiary's interests.
- The term of the trust expires,
- The trust purpose is fulfilled,
- The trust purpose becomes illegal,
- The trust purpose becomes impossible to fulfill, or
- The trust is revoked.
If the trust ends, the trustee will continue to act as trustee until s/he finishes up the affairs of the trust.
- if the trust must continue in order to carry out the purpose of the trust
- if the reason for changing or ending the trust outweighs the interest in carrying out the purpose of the trust
If the settlor and all beneficiaries consent:
The law says if the settlor and all beneficiaries consent, they can change or end the trust.
If any beneficiary does not consent to change or end the trust, the other beneficiaries, with the consent of the settlor, can petition the Court to partially change or end the trust as long as the interests of the beneficiaries who do not consent are not seriously affected.
If the trust has uneconomically low principal:
If the Court decides it is costing more to administer the trust than the trust is worth, the beneficiary or trustee can ask the Court to end or change the trust, or appoint a new trustee.
If the trust principal is worth $20,000 or less, the trustee can end the trust.
Change or end the trust if circumstances change:
The law says the Court may change or end a trust if circumstances have changed and continuing the trust would defeat or weaken the trust.
