Serving as a trustee means taking responsibility for property that belongs to a trust and making decisions that can directly affect its beneficiaries. That responsibility can feel especially significant when you are administering a trust for a family member or someone close to you. California trustees must follow the terms of the trust, act in the beneficiaries' interests, protect trust property, maintain appropriate records, provide required notices and accountings, and address applicable tax obligations.
At Slater Cosme, PC, we help trustees understand and carry out their responsibilities throughout the trust administration process. From our Pasadena, California office, we assist fiduciaries throughout Los Angeles County with beneficiary communications, trust assets, accountings, distributions, and other administration requirements. Contact us to discuss your responsibilities and the steps required to administer the trust properly.
Follow Your Fiduciary Duties to the Beneficiaries
As a trustee, you owe fiduciary duties to the trust's beneficiaries and must administer the trust in accordance with its terms and California law. Your responsibilities affect decisions ranging from safeguarding property to investing assets and making distributions.
Important duties may include:
Duty of loyalty: You generally must administer the trust solely in the interests of the beneficiaries and avoid improper self-dealing or conflicts between your interests and theirs.
Duty of impartiality: If a trust has two or more beneficiaries, you must act impartially in investing, managing, and distributing trust property while considering their respective interests.
Duty of prudent administration: You must administer the trust with reasonable care, skill, and caution under the circumstances.
Duty to control and preserve property: You must take reasonable steps to take control of and preserve trust property.
You must also follow the terms of the trust unless a provision is legally invalid or another applicable rule permits or requires a different course of action. Keeping the trust document accessible and reviewing it before making significant decisions can help you understand the authority it grants and the limits it imposes.
Our attorneys can help you interpret the trust terms and understand how your fiduciary duties apply to decisions that arise during administration.
Keep Clear Records and Provide Required Accountings
Good recordkeeping allows you to document what happened to trust property and explain your administration to beneficiaries. You should be able to identify trust assets, income received, expenses paid, distributions made, and other significant transactions.
Keeping trust property appropriately identified and separate from your own property also helps prevent confusion over ownership. Financial records may include bank and investment statements, receipts, invoices, property records, tax documents, and documentation supporting distributions and trustee expenses.
California law generally requires a trustee to provide accountings at least annually, upon termination of the trust, and upon a change in trustee, subject to statutory exceptions. A required accounting generally provides beneficiaries with information about trust receipts, disbursements, assets, liabilities, trustee compensation, and other administration activity.
Accurate records make those accountings easier to prepare and can also help you respond when a beneficiary has questions about a transaction. If you are uncertain about an accounting requirement or what information must be disclosed, we can review the trust and circumstances with you.
Send Required Notices on Time
Certain events can trigger specific notice requirements, so identifying applicable deadlines should be an early part of trust administration. In California, a trustee generally must provide the notice required by Probate Code §16061.7 when specified events occur, including when a revocable trust, or a portion of it, becomes irrevocable upon the settlor's death.
When the statute applies, the trustee generally has 60 days from the triggering event to serve the required notification on the people entitled to receive it. The notice must also contain specific information required by California law.
This requirement is more than a courtesy to family members. Proper notice informs beneficiaries and heirs of the trust and their rights, and it can affect the time available to challenge the trust.
You should therefore identify the people entitled to notice, verify their addresses, and document when and how notice was provided. At Slater Cosme, PC, we can help you determine which notices are required and prepare them as part of the Probate & Trust Administration process.
Address the Trust's Tax and Valuation Requirements
Tax responsibilities vary depending on the type of trust, its assets, its income, and whether the person who created the trust is living or deceased. You should determine early in the administration which federal and California filing requirements apply rather than assuming every trust is taxed in the same way.
The IRS explains that Form 1041 is used by fiduciaries of qualifying estates and trusts to report items such as income, deductions, gains, losses, distributions, and income tax liability. Grantor trusts, including many revocable living trusts, can be subject to different reporting rules during the grantor's lifetime.
Asset values may also need to be established during administration. For example, determining the value of real estate, securities, business interests, or other property may be necessary for tax reporting, accounting, distributions, or a later sale. The appropriate valuation method depends on the asset and the reason the value is needed.
Tax matters can overlap with legal administration, so trustees may need to coordinate legal guidance with tax or valuation professionals when appropriate. We can help you identify administration issues that need to be addressed and coordinate the legal aspects of the process.
Carry Out Your Trustee Duties With Confidence
Proper trust administration requires more than distributing property to beneficiaries. You must understand the trust, protect its assets, meet applicable notice and accounting requirements, maintain reliable records, and make decisions consistent with your fiduciary obligations.
At Slater Cosme, PC, we understand that serving as trustee can involve significant responsibility, particularly when you are handling a loved one's affairs while also dealing with beneficiaries and administrative deadlines. We help you understand what the trust requires, identify the steps that need to be completed, and address issues that arise during administration.
From our Pasadena office, we assist trustees throughout Los Angeles County with trust administration matters. Contact us today to schedule a consultation and discuss how we can help you fulfill your responsibilities and properly administer the trust.
