## Trust administration in California When the person who created a trust (the **settlor** or **grantor**) becomes incapacitated or dies, the **trustee** takes over — managing the trust's assets, paying its bills, and ultimately distributing what's left to beneficiaries. ### California trust law Has Cal. Probate Code; not UTC. ## The trustee's basic duties **1. Duty of loyalty.** Act solely in the beneficiaries' interests. No self-dealing without authorization. **2. Duty of care.** Manage trust assets with the prudence of a reasonable investor. Often called the "prudent investor rule." **3. Duty of impartiality.** Treat beneficiaries equitably (with consideration for their different roles — e.g., income beneficiaries vs remainder beneficiaries). **4. Duty to account / inform.** Keep beneficiaries informed about trust assets, transactions, and distributions. Periodic accountings (annual is common). **5. Duty to follow trust terms.** Distribute according to the trust document — neither more generous nor more restrictive. **6. Duty to diversify.** Modern portfolio theory generally requires diversification of investments. **7. Duty to make trust property productive.** Invest rather than letting cash sit idle. ## Initial steps after the settlor's death 1. **Locate the trust document** — original is preferred 2. **Identify successor trustee** — named in the trust 3. **Successor accepts trustee role** — typically by written acceptance 4. **Death certificate** — order multiple certified copies 5. **Identify beneficiaries** — review trust + most recent amendments 6. **Notify beneficiaries** — many states have statutory notice requirements (60-90 days) 7. **Obtain Tax ID** for trust (EIN) — replace settlor's SSN 8. **Inventory assets** — bank accounts, investments, real estate, personal property, business interests 9. **Secure assets** — change locks, mail forwarding, alarm systems 10. **Notify financial institutions** — change account ownership to trust under successor trustee ## Notice to beneficiaries Most state trust codes require notice within a defined period (60-90 days) of the trust becoming irrevocable (i.e., settlor's death). Notice typically must include: - Trust existence - Trustee identity + contact info - Right to request a copy of the trust - Time period to contest Failure to give proper notice can extend contest periods and create personal liability. ## Funding considerations If the settlor's revocable trust wasn't fully funded: - Assets in settlor's individual name need probate (with a pour-over will to dump them into trust) - Real estate may need new deeds or court orders - Beneficiary-designated accounts (life insurance, retirement) follow designations, not trust ## Tax considerations **Federal estate tax:** - Threshold ~$13.6M (2024) — most estates owe nothing - Form 706 due 9 months after death IF estate exceeds threshold - Portability election allows surviving spouse to use deceased's unused exemption **State estate tax** — applies in CT, HI, IL, ME, MD, MA, MN, NY, OR, RI, VT, WA, DC; thresholds much lower than federal in most **State inheritance tax** — applies in IA (phasing out), KY, MD (also estate), NE, NJ, PA **Federal income tax** — Form 1041 for the trust, generally calendar-year basis. K-1s issued to beneficiaries for distributions. **Step-up in basis** — assets generally get new tax basis at date of death; advantageous for beneficiaries. ## Distribution **Outright distributions:** - Easier to administer - Beneficiary gets immediate access - Loses creditor / divorce / Medicaid protection **Continuing trusts:** - For minors (until age 18 or older) - For beneficiaries with disabilities (special needs trusts) - For spendthrift protection - For estate-tax planning (dynasty / generation-skipping trusts) - Trustee continues managing under specified terms **Discretionary vs mandatory:** - Mandatory — "the trustee shall distribute X per year" - Discretionary — "the trustee may distribute as the trustee deems appropriate for support / education / health / maintenance" - HEMS (Health, Education, Maintenance, Support) is a common ascertainable standard ## Trustee compensation Trustees are entitled to reasonable compensation: - Family / individual trustees often serve without pay - Professional trustees charge — often 0.5-1.5% of trust assets annually - Trust document may specify ("reasonable," specific amount, percentage) - Some states have statutory schedules (CA, NY) ## Beneficiary disputes Common conflicts: - Trustee's investment decisions - Slow distributions - Self-dealing allegations - Family-business sale decisions - Distribution disputes between siblings - Removal-of-trustee petitions Most modern trust statutes require non-judicial dispute resolution attempts before litigation. ## When to hire help - **Always for complex trusts** — multi-generation, business interests, real estate in multiple states, tax issues - **For first-time trustees** — even simple trusts benefit from initial consultation - **For tax filings** — CPA familiar with trust returns - **For trustee disputes** — separate counsel for trustee vs beneficiaries when conflict arises ## What you should do If you've been named successor trustee in California: hire a trust attorney for initial setup AND a CPA for tax filings. Many California estate-planning attorneys offer flat-fee trust-administration packages that include the major early steps. The trustee's exposure for personal liability is real — getting it right matters. --- *This guide is general information about California law as of early 2026 and is not legal advice. Trust administration is technical and varies by state. Talk to a licensed California estate-planning attorney about your specific trust.*