Dear Len & Rosie,
My mother-in-law passed away last week. She had a trust, with her six children named in it. Her oldest daughter is the trustee. What are her immediate duties and responsibilities, now that her mother has passed? Should she reassess the family home? File taxes? Close the bank accounts? Notify each of the beneficiaries?
Your sister-in-law, as trustee, has to conduct a trust administration. Many people think that it’s really easy to administer a trust. We call this the “Living Trust Myth.” Trust administration is easiest where the successor trustees and the beneficiaries are the same people and they each get equal shares. Unless there’s fighting, it’s not so hard to divide everything by two. In this case, there are five siblings who are beneficiaries. It can still be easy, but that depends on the trustee being honest, organized, diplomatic, and good with her own money – if she isn’t, she shouldn’t be in charge of other people’s money.
The first step is for the trustee to notify the trust beneficiaries and legal heirs of her mother (probably the same people) of the existence of the trust with a notice under California Probate Code section 16061.7. Even disinherited children are entitled to this notice. Receiving this notice triggers a 120 day countdown on their right to contest the validity of the trust. This time period is why many trustees won’t distribute anything until a few months after the date of death – the trustee doesn’t want to have to ask for anything back if the trust is declared invalid by court order.
The second step is for the trustee to review all of her mother’s assets and determine exactly what has to be done to each asset to get it to the beneficiaries. Assets outside of the trust may have to go through probate or be collected using Small Estate Affidavits. Assets held in joint tenancy and with pay-on-death beneficiaries pass outside of the trust and are usually collected by the beneficiaries directly.
After everything is in the name of the trustee, she may then pay off the bills and sell the assets that have to be sold. When everything is ready to be distributed, the trustee should either get the beneficiaries to waive their right to an accounting of the trust, or bite the bullet and pay a bookkeeper to prepare one. Then, the trustee can distribute everything except for a reserve for taxes and unexpected debts.
Many trustees think that they can do all of this themselves. In your case, this would be a bad idea for your sister-in-law. If she makes a mistake that is discovered only after she’s given away all the money, she may have to pay to fix it out of her own pocket. She should hire an attorney, at trust expense, to make sure she does the job right and to protect herself from potential liabilities.
Len & Rosie