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Mr. Miller has many years of experience in designing and implementing a comprehensive variety of Trusts, Wills, and other estate planning documents, as well as settling estates in the most expedient and appropriate method. Further, he counsels and assists clients on becoming eligible for VA benefits and Medi-Cal.

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What Exactly Does My Successor Trustee Do?


By merv,

  Filed under: Elder Law, Estate Planning, Probate & Estate Administration

Dear Mr. Miller:

I am getting up in years and trying to decide if my Living Trust, as it stands, needs to be changed.  I put it together many years ago and named my daughter, now in her 60’s, as the one to take over for me if I can’t handle my affairs anymore, or die.  She’s bright and caring but I’m not sure if naming her is correct, or fair.  I have about $2.5 million in cash, securities, and my house.

Can you help? What exactly does she have to do as the successor Trustee?

Worried Dad

Estate Review
Identifying the Assets
Gaining Control of the Assets
Identifying and Notifying the Beneficiaries
Taxes
Distribution
The Trustee’s Best Friends

Dear Worried:

Estate Review:  It’s good to review your estate plan periodically.  I usually suggest every 2-3 years.  You’ve asked what “exactly” does the successor Trustee have to do.  Since every case is a bit different, I can’t answer “exactly.”  What I can say is, she will have to do a lot.  And that “a lot’ depends significantly on what you own and who your beneficiaries may be.  Here’s an article on selecting a Trustee.  

Identifying the Assets:  Let’s start with the “what you own.”  You have cash, securities, and a house.  How many securities accounts do you have, how many bank accounts.  The more you have the more complex things can get, especially if they are titled differently—your name alone, your name and pay on death to someone, the trust’s name.   And you may have several bank accounts that are “pay on death format,” but each to a different beneficiary.  And are any of them IRAs?  Since IRAs are treated differently for taxes, that can, at times, really complicate things.  Do any of the accounts have more than one pay on death beneficiary.  Now, it is true, that technically speaking, the successor trustee only deals with accounts that are held in the name of the Trust and not with ones titled “pay on death.”  It is, however, also true that if you wanted everything to  pass via your Living Trust that “pay on death” accounts are not, generally, a good idea.  Let’s assume for a moment that all of your accounts, cash and securities, are “pay on death” format and the house is to be sold after you pass.  Where does the money come from to pay taxes and insurance or fix up the house so it gets top dollar–especially if the pay on death beneficiaries are not the sole beneficiaries of the Living Trust?  And where does the money come from to pay income taxes that are owed for income earned in the year in which you passed, but prior to your death?  Or funeral expenses, or the attorney, or the CPA?   I guess your daughter could get a loan against the house to raise money for these purposes but that does complicate things and increase the expenses.

And there are the accounts that are in your name alone.  Depending on the total value of those accounts, that may necessitate a court Probate proceeding .  In California in 2022 that magic number is $184,500 (it changes every year).  If above that magic number, probate is required.  And I assume you named your daughter as the person to be appointed by the court to handle things (i.e. the executor).  So that’s one more thing that needs to be dealt with.

Gaining Control of the Assets:  And, of course, once everything is identified, the next step is to gain control over the asset (have financial institutions recognize the trustee’s authority over the account or get title in the Trustee’s name to the real estate).  Often times that is referred to as “marshaling the assets.”  For a Living Trust that’s done with a death certificate, a copy of the Trust document, and typically, an Affidavit reciting the fact of death, the paragraph number in the Trust document under which you are appointed, and your acceptance of the job.  For assets in your name alone without a beneficiary named, that’s accomplished via the Probate process .  And if there is real property in other states (you didn’t mention that but just in case–and that includes raw acreage), that could require a Probate proceeding in those other states.  So you can see that the duties are mounting and the effort to keep everything straight is getting more substantial with each little twist and curve.

Identifying and Notifying the Beneficiaries: The Trust will typically identify the beneficiaries.  Are they all still alive, does your daughter know how to contact them, are any in prison, etc?  On some cases I have had to hire an “Heir Search” firm to find the beneficiaries.  In some cases, people have died and their kids step into their shoes–since there are often more than one child, the number of beneficiaries with whom your daughter must deal just increased.  Sometimes the children have died and now we’re dealing with members two generations below the original beneficiary.  It can get complicated.  In a few cases I have had to draw a family tree to keep things straight.  And occasionally, in California, we have had to notify a state agency that one of the beneficiaries is currently in a California prison so that the inheritance can pay back any funds previously paid out under  the Victims of Violent Crimes program.

Taxes:  And, of course, the IRS still wants its pound of flesh for taxes owed by you or by the estate for income earned during the administration period.  If any beneficiaries are residing out of state, then your daughter may have to withhold money from any distribution to that out of state resident (sort of like when an employer withholds from an employee’s paycheck for taxes).  Your estate is not currently large enough to be subject to the estate tax but if it were, that would be another duty.  However, with a house, at least in California, the county tax assessor must be notified and the house may be subject to an increase in taxes under Proposition 13. 

Distribution:  If the Trust designates that the beneficiaries receive unequal amounts, maybe your daughter gets more and your cousin gets less, is she going to know how to figure that out.  Seems simple but it often isn’t.  What if you gave your daughter a loan and she hasn’t yet paid it all back?  Let’s say she still owes $50,000.  Does she pay all of that over to the cousin, a portion, only half?  It all depends on what the Trust says and the math.

The Trustee’s Best Friends:  And what I have listed is by no means exhaustive, it is just the tip of the iceberg.  So you can see that what “exactly” she needs to do depends on what issues exist when you pass, depending on the documents, the assets, the beneficiaries, etc.  She needs a really competent attorney and a really competent CPA.   And it would be useful if you selected an attorney to review your documents and give you advice and, when needed, she uses the same one.

We do estate reviews and handle estates after someone dies on a constant basis and have the experience to assist you and, later, your daughter.  Call us at 760-436-8832 to schedule an appointment.

 

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About Living Trusts

About Living Trusts is hosted by the Law Offices of Merwyn J. Miller, as your online resource center to help you explore these key issues, and others, regarding your estate.

Merwyn J. Miller, J.D.

  • Board Certified Specialist in Estate Planning, Trust & Probate Law
  • Co-Author of legal text book and of “Don’t Go Broke in a Nursing Home
  • Teacher of law courses at public and private colleges
  • Continuing Education Instructor for attorneys
  • Columnist for largest regional newspaper in San Diego County and professional journals for 15 years, Contributing author to the book “In Your Service: The Veteran’s Friend”
  • Masters Degree in Financial Services - Estate Planning
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