When a Loved One Dies: A Successor Trustee’s Checklist

When a loved one dies, it is an emotional time accompanied by confusion on what happens next. If you are named as the successor trustee, you likely haven’t had any experience dealing with the steps you need to take in settling your loved one’s Living Trust. If you are the Successor Trustee – or need to figure out who is – this simple guide provides a few steps you need to follow. Getting support from an attorney with experience in Trust Administration enables the process to be implemented smoothly and efficiently.

Step 1: Inventory

The first step in settling your loved one’s Living Trust is to locate all the decedent’s original estate planning documents, Pour-Over-Will, and other important papers.

If your loved one has left any written funeral, cremation, burial, or memorial instructions, store them in a safe place until you meet with your trust attorney.

Part of the inventory process is to obtain information about your loved one’s assets, including bank and brokerage statements, stock and bond certificates, life insurance policies, corporate records, car and boat titles, and deeds for real estate. You will also need information about the decedent’s debts, including utility bills, credit card bills, mortgages, personal loans, medical bills, and the funeral bill.

Step 2: Review the Provisions of the Living Trust

After you locate the important documents, you need to read the Living Trust to determine the provisions. Note the following as you read it over:

• Are there special instructions regarding the decedent’s funeral, cremation, or burial?
• Who gets the decedent’s personal effects?
• Who gets any specific bequests?
• Who gets the decedent’s residuary trust?
• What was the date and location where the trust agreement was signed?
• Who signed the trust as witnesses and Notary Public?

Step 3: Make a List

In addition to reading the Living Trust and summarizing what it says, review your loved one’s financial documents and make a list of what he or she owned and owed, how each asset is titled (in the name of the trust, in the decedent’s individual name, as tenants in common, or in joint names with someone else), and–for assets and debts that have a statement–the value of the asset or debt as listed on the statement and the date of the statement. In addition, the decedent’s prior three years of income tax returns should be located and set aside.

Step 4: Meet With a Trust Attorney

You do not have to go through this process of settled your loved one’s estate alone, or subject yourself to personal financial liability as the successor trustee. You can work with a Trust Attorney to: determine the accurate value of the estate; resolve any outstanding debts and expenses; minimize estate taxes; administer trusts in conjunction with your family’s existing advisors and fiduciaries; and distribute assets to the proper beneficiaries as quickly and efficiently as possible.

If the estate and trust assets are improperly accounted for or in violation of California law, the executor and/or trustee can be held personally liable. Strategies and tools to minimize taxes may be overlooked, and there could be confusion over which beneficiaries are entitled to specific assets. All of this can lead to unnecessary expense, costly disputes, litigation, family infighting, and other financial and interpersonal problems. This is where a Trust Attorney can be of tremendous help to you and minimize your risk.

Step 5: Value the Assets

Once you’ve met with a trust attorney, the next step in settling a trust is to establish date of death values for all your loved one’s assets.

All financial institutions where the decedent’s assets are located must be contacted to obtain the date of death values. For assets including real estate, personal effects including jewelry, artwork, collectibles, and closely held businesses, they will need to be appraised by a professional appraiser.

Note that the value of all of the decedent’s assets will need to be established, including those passing outside of the trust, in order to determine if any estate taxes and/or inheritance taxes will be owed. Assets that can pass outside of the trust may include life insurance, IRAs, 401(k)s and annuities with named beneficiaries.

Step 6: Pay Bills

Once the date of death values have been determined for all of your loved one’s assets, the next step in settling the Living Trust is to pay your loved one’s final bills and ongoing expenses related to administering the trust. This is also the time that you, as the Successor Trustee, will need to evaluate whether trust assets, such as real estate or a business, should be sold. It is your job as a successor Trustee to figure out what bills are owed at the time of death, determine if the bills are legitimate, and then pay the bills. You will also be responsible for paying the ongoing expenses of administering the trust, such as legal fees, any accounting fees, utilities, insurance premiums, mortgage payments, and homeowner’s or condominium association fees.

Step 7: Pay the Taxes

Once you have paid the final bills and have the ongoing trust expenses under control, the next step in settling the trust is to pay any income taxes and death taxes that may be due. No bills should be paid to anyone until you are certain you have enough money to pay the taxes.

Aside from filing the decedent’s final income tax return, if the estate earns income during the course of administration, then the successor Trustee will need to prepare and file all required federal estate income tax returns as well as any required state estate income tax returns.

Step 8: Distribute

One of the last steps is to distribute trust income or property to trust beneficiaries according to terms of the trust agreement. You will need to complete transfer deeds and other change of title documentation. For information on how to write a final distribution letter to beneficiaries you should contact a Trust Attorney.

Handling an estate is a tremendous responsibility, time-consuming, and involves a lot of tasks. This is only a brief Successor Trustee checklist and there are more duties that need to be done. If you need help walking you through the process, consult with an Estate or Trust Attorney for guidance. CunninghamLegal has more than 20 years of experience handling the intricacies of Trusts, and we would love to help you.