What Are A Successor Trustee’s Responsibilities When The Original Trustor/Settlor/Grantor Dies?
When the maker of a Revocable Trust dies, the assets in the Trust become property of the Trust. If the Grantor – also known as the Trustor, Grantor or Settlor – acted as Trustee while they were alive, the named Successor Trustee will normally take over as Trustee of the Trust upon the Grantor’s death.
The Successor Trustee then has a duty to collect, inventory, manage then ultimately distribute the Grantor’s assets the Trust to the named beneficiaries. A Successor Trustee is responsible for settling the Trust or continuing to manage it for the decedent after death pursuant to the terms of the Trust. The exact duties of the Successor Trustee will depend on the terms set forth in the documents of the Trust. These documents are called the Trust Agreement.
Serving As A Successor Trustee Is Time-Consuming And Can Be Challenging
Failing to fulfill the duties of a Successor Trustee can put you at the center of a family dispute. In addition to locating and protecting the Trust’s assets, the responsibilities of a Successor Trustee include:
- Gathering an inventory of retirement accounts, annuities and life insurance policies for which the Trustee of the Trust is named the beneficiary
- If probate is necessary, communicating with the Executor or personal representative of the estate
- Collecting values for the Trust’s assets
- Initiating the process for real estate appraisals
- Determining business interest values
- Sending notifications to the Grantor’s heirs and the Trust’s beneficiaries per Probate Code Section 16061.7
- Maintaining an accurate accounting of all income and expenses of Trust transactions
- Keeping all receipts, and reporting the accounting to all Trust beneficiaries as required by law
- Identifying any creditors of the Grantor
- Determining then paying off the legal debts
- If legally required, determining the income tax or estate tax liabilities
- Preparing and filing all required income tax and estate tax returns
- Paying any ongoing expenses of administering the Trust until the Trust is terminated, and the final Trust property has been distributed to the named beneficiaries
- Raising any cash necessary to pay off any incurred debts, the ongoing expenses of administering the Trust and income tax and estate tax liabilities
- Investing and managing the Trust assets until they are distributed to the named beneficiaries of the Trust
- Getting beneficiaries to sign receipts for all distributions
This list is not exhaustive. Other duties may arise in the course of acting as Successor Trustee. Depending on the terms of the Trust, a Successor Trustee may have a longer role to play in managing the Trust assets than an Executor of a Will.
What Is The Difference Between A Trustee And An Executor?
A Trustee and Executor are fiduciary positions; however, an Executor will oversee and handle the probate process of the decedent’s estate after death of the decedent, whereas the Trustee oversees and manages the Trust estate.
The Executor will be responsible for locating and collecting the decedent’s assets, as well as pay any debts and taxes. The Executor will report to the probate court and distribute the assets after the decedent’s death according to the terms of the Will.
A Trustee has a much larger variance in how long the position will last. Trustees are named in the Trust documents. The Trustee acts when the original Grantor dies or is no longer able to act on their own behalf. The original Grantor, or creator of the Trust, is the original Trustee to the Trust. The Successor Trustee begins their work once the original Grantor dies or becomes incapacitated. A Trustee usually manages the Trust estate without the intervention of the court or the probate process. Once the Trustee assumes their role, the duties and responsibilities which are provided for in the Trust documents and the California Probate Code govern the process.
A Successor Trustee would only receive a distribution of assets from the Trust if they are also named as a beneficiary of the Trust. Usually, a Successor Trustee cannot change the terms of the Trust but must manage and distribute the Trust assets as specified in the Trust Agreement.
Some very important things to remember as Successor Trustee are:
- Keep your personal assets separate from the Trust assets.
- Do not comingle your investments or checking accounts with those of the Trust.
- Do not use Trust assets for your own benefit, like buying yourself something with Trust funds (unless the trust specifically authorizes it).
- Treat the Trust beneficiaries equally. Do not favor any beneficiary over another (including yourself, if you are a beneficiary).
- By law, Trust assets are to be prudently invested in a conservative manner, resulting in minimal risk and reasonable growth with minimum risk.
- Keep accurate records, all income and expense receipts
- File timely tax returns, and report to the beneficiaries as the Trust and the Probate Code requires.
Hiring An Attorney For Assistance
All things considered, if you are named as Successor Trustee after the death of the Grantor, you would be well-advised to look into hiring an attorney to help you with the duties and responsibilities bestowed upon you. The Successor Trustee can hire an attorney to assist them, and they can pay that attorney out of the Trust estate. Contact Simon Law by calling (415) 523-7847 or sending an email to initiate a consultation.