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Successor Trustee Tip Sheet on How to Administer and Distribute Trust Assets
Successor Trustees to a decedent’s trust have duties and legal obligations. Internet service by Mark Bidwell for Successor Trustees to obtain legal advice and documents to meet their legal obligations to the beneficiaries and creditors of trusts.
Successor Trustees need a bank account to make deposits and pay debts of the estate. Banks will require a Federal Tax Identification Number, also known as Federal Employer Identification Number (FEIN). A tax number can be obtained online at the IRS website.
A tax return from the date of death to the close of the estate is needed for each year the trust has assets. The return is Form 1041 and is filed on the tax number used to open the bank account. In addition to 1041 returns a final return from the beginning-of-
The Successor Trustee is required to notify heirs of the decedent and beneficiaries of the trust in a format and manner proscribed by California law. Requirements of the notice are in California Probate Code Section 16061.7. The wording and format is very specific. For example the law directs which section has to be in at least 10-point boldface type. This notice also serves to establish a statue of limitations on when the trust can be challenged.
The Successor Trustee is required to notify the death to each County where the decedent owned real property. Notice is sent to the assessor’s office of the County. The notice is titled “Change in Ownership Statement Death o Real Property Owner.” The form comes with a warning: “Failure to file this statement will result in the assessment o a penalty.”
Unlike the notifications an accounting is not a legal requirement unless a demand is made by a beneficiary of the trust. But good practice is to provide an accounting. An accounting of assets and debts, income received and debts paid provides transparency and minimizes second guessing of the Successor Trustee’s actions.
The final duty of the Successor Trustee is to distribute assets of the trust. Real property requires filing of an affidavit of death of trustee and a quit claim deed with the County Recorder. The affidavit of death puts the County on notice the owner has died and the name of the Successor Trustee who has authority to transfer the property. The Successor Trustee signs a quit claim deed to transfer ownership out of the trust and to the beneficiaries of the trust as directed in the trust document.
Good practice is for the Successor Trustee to obtain an appraisal on the property as of date of death. The basis to the new owner is the fair market value of the real property. This is a known as a step-up in basis. Capital gains tax is on the difference between sale price and the date of death market value. An appraisal is needed for any IRS audit.
Any real property distribution to a child of the decedent qualifies for Proposition 13 parent-to-child property tax exclusion. A claim for reassessment exclusion must be filed within 3 years of transfer. Good practices suggest not putting this off and submitting it once the quit claim deed has been recorded.
This press release is provided by Mark W. Bidwell, a California Attorney. Mark W. Bidwell markets through websites, such as www.IrvineProbateAttorney.com. His office is at 18831 Von Karman Avenue, Suite 270, Irvine, CA 92612. Phone number is 949-474-0961. Email address is Mark@Bidwelllaw.com.