Things a Successor Trustee Must Do After the Original Trustor/Settlor/Grantor Dies
When the maker of a Revocable Trust, also known as the Trustor, Grantor or Settlor, dies, the assets in the Trust become property of the Trust. If the Grantor acted as Trustee while they were alive, the named Successor Trustee will normally take over as Trustee (also known as Successor Trustee) of the Trust upon the Grantor’s death.
The Successor Trustee is then responsible for gathering and accounting for the Grantor’s assets and using them, maintaining them, and distributing them to the beneficiaries named in the Trust.
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 a huge responsibility and is often time-consuming, challenging, and can put you at the center of a family dispute. The Successor Trustee has several responsibilities they must carry out after the death of the Grantor. These responsibilities include, but are not limited to, the following duties:
- Locating and protecting the Trust assets;
- Collecting life insurance policies, annuities, and retirement accounts for which the Trustee of the Trust has been named as the beneficiary;
- Coordinating with the personal representative or Executor of an estate if probate is necessary;
- Obtaining the date of death values for the Trust assets, including appraisals of real estate and business interests;
- Notifying the Grantor’s heirs and the Trust’s beneficiaries per Probate Code Section 16061.7;
- Maintaining an accurate accounting of all Trust transactions (income and expenses), keeping all receipts, and reporting the accounting to all Trust beneficiaries as required by law;
- Identifying any creditors of the Grantor and paying off the legal debts;
- If legally required, determining the income tax or estate tax liabilities and 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; and
- 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.
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. Both 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:
- Never mix (comingle) Trust assets with your own personal assets.
- Always keep separate checking accounts and investments from your own personal accounts.
- Never us 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).
- Trust assets must be invested in a prudent (conservative) manner, in a way that will result in reasonable growth with minimum risk.
- You are responsible for keeping accurate records, keeping receipts of all income and expenses, filing tax returns, and reporting to the beneficiaries as the Trust and the Probate Code requires you to do so.
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.
The views expressed in this article do not contain legal advice, may not be current and is subject to change without notice. The information contained herein is provided for general information and educational purposes only and is not a substitute for professional advice. Should you need legal advice, contact Simon Law directly and request to speak to an attorney regarding your case.