One of the more daunting tasks in life might be handling the estate of your parents after they die. You’re not only dealing with the grief, but you’ve got a huge job in front of you just handling the estate. If you’ve found this site, you’ve probably, in some manner shape, or form asked, “… What should I do as a successor trustee? …”
In this article, I will try to lay it out for you with some broad concepts about which you need to be aware. But first, let me disclose, this blog article is not intended to be legal or tax advice and you are strongly advised to consult with a professional CPA and Trust Attorney expert in these matters.
If you’re wondering what are the duties of a successor trustee, then this list will help you grasp the issues you’re going to have to manage. This is no small job so the old joke about, “Q: How do you eat an elephant? A: One bite at a time”, completely applies here.
What are my duties as a successor trustee?
Locating and protecting the trust’s assets
Collecting life insurance policies, annuities, and retirement accounts for which the revocable living trust has named a beneficiary(ies)
Coordinating with the personal representative or executor of the maker of the trust’s estate if probate is necessary
Obtaining the date of death values for the trust assets, including appraisals of real estate and business interests*
Identifying the trust’s creditors and paying off these debts
Determining the trust’s income tax or estate tax liabilities
Preparing and filing all required income tax and estate tax returns
Paying the ongoing expenses of administering the trust until it is terminated and its remaining property can be distributed to the beneficiaries
Raising the cash necessary to pay off existing debts, the ongoing expenses of administering the trust, and income tax and estate tax liabilities
Investing and managing the trust assets until they can be distributed to your beneficiaries
*Whether or not you plan to sell the real estate owned by the trust, you MUST get a stepped up value for the property. While a real estate broker can help with determining the market value of the real estate at the time of death for stepped up basis purposes (in order to mitigate capital gains tax liability), I strongly advise hiring an independent fee appraiser to minimize scrutiny and maximize defense of value if audited
What do you do when you have conflicts with siblings?
It’s advisable that you contact someone specializing in Family Mediation issues primarily focusing on constructive ways to resolve conflict or disputes. As a successor trustee, should you be anticipating issues, it might be a good idea to pre-emptively contact a mediator in order to avoid brewing issues. Look for someone that will offer a free initial consultation, and will assist the parties in preparing a preliminary agreement.
Common Sense Rules for Successor Trustees
There are some “common sense” rules which apply and taking heed of these will help mitigate any trouble you can get into. Your responsibility as a successor trustee falls in the category of fiduciary duty and so you must be very careful, deliberate, and mindful of each decision you make.
Ask for help when you need it. This includes seeking out assistance from experienced advisors, such as a CPA, financial professional, or a trust lawyer
Treat all beneficiaries fairly and equally. This does not mean that you have to concede with all requests of a beneficiary when distributions are subject to your discretion. However, it does mean that you cannot favor one beneficiary over another.
Read the trust instrument carefully and thoroughly so that you have a solid understanding of the intention of the trust’s creator.
Remember that IRS and court deadlines are firm and must be carefully followed.
Understand that it is your responsibility to manage all of the assets held in the trust.
Familiarize yourself with any personal issues that may exist between the beneficiaries, trustees, or other fiduciaries. Understanding these issues may help you to avoid costly legal battles.
Remain diligent when it comes to staying on top of new developments in California trust law. If you do not have the time to do so, consult with an experienced trust attorney in California
Selling Property As A Successor Trustee
It’s likely that one of the first things you’re going to want to understand as you’re managing the emotions of losing a parent and as you come to realize that your most important job now is to manage the legacy your parent left to the beneficiaries (and in most cases, as the successor trustee, you’re one of the beneficiaries), is what a buyer might pay for the real estate.
Take it from experience here, you’re not going to want to go to those big portals in order to use their computer models. Here’s why these companies look like their “free” but they are from it. They make money by selling your data (after they’ve data mined your computer and/or mobile devices) to their advertisers. You’re already getting phone calls, letters, and emails from all sorts of entities - don’t add to that pile by using those portals and then allowing their advertisers to start bombarding you with solicitations.
Instead, you’re welcome to use my website. Your information remains confidential and private. We will never sell or share your information. I have two computer algorithms you’re welcome to use. The first one you can learn about by watching these two very, very brief videos on this page and then proceed from there. The other will provide you with three independent computer models on possible market value so that you can compare and contrast. The benefit here is that you get some checks and balances. A word of warning on computer models… they can not nuance very well, value factors such as view, home condition, lot utility, and micro-location. In order to dial in value, you really do need an experienced real estate broker along with the stepped-up basis appraisal. By the way, as a successor trustee, you might have to deal with the disposition of a business. This adds another layer of complexity that has to be analyzed. This is a specialty that demands focus and integrity and you can start by going here to get more information on business evaluation
What do you do with the proceeds from the sale of the Trust’s assets?
In many, if not most of the cases I’ve dealt with for my clients who are successor trustees, they are also the beneficiary or at least one of the beneficiaries. Again, this article is not intended to be financial, tax, or legal advice. I’m here to provide broad concepts to consider. In my 43 years as an agent and broker, it’s been my privilege to come across excellent individuals that can help you manage your money. Good wealth managers are hard to find. So you can start here and here.
In Conclusion
There’s quite a bit to consider here and the job ahead of you is a very serious one that will have challenges. With the help of professionals, you will manage it and get through it all with gratitude to your parent or parents who left you in charge as a successor trustee and as a beneficiary to what they have built in their life time.
