When One Spouse Dies and You Have a Joint Living Trust: What Happens Next (California)

Losing a spouse is overwhelming—and the paperwork that follows can feel like it arrives all at once. The good news is that a properly funded joint living trust is designed to make this transition smoother, especially when the trust says “everything goes to the surviving spouse.”

Below is a plain-English walkthrough of what typically happens, plus a practical checklist of next steps.

How does “the system” find out someone died?

A lot of the process starts with the death certificate.

• The funeral home usually helps complete and file the death record and can assist you in ordering certified copies (you’ll need these for banks, insurance companies, and others).

• Social Security is often notified by the funeral home (though not always, so it’s worth confirming).

• Other institutions—banks, brokerage firms, life insurance carriers, pension administrators, mortgage servicers—generally do not get automatically notified. In most cases, the surviving spouse (or trustee) notifies them and provides a certified death certificate.

A practical tip: many families order multiple certified copies of the death certificate, because several institutions want an original certified copy rather than a photocopy.

What a joint living trust usually does at the first death

A living trust doesn’t “end” when the first spouse dies. Instead, the trust continues—and in an “all to survivor” plan, the surviving spouse usually becomes the acting trustee (often as sole trustee) and continues managing the trust assets for their own benefit.

That said, even when no probate is needed, there’s still a real-world administration phase:

• confirming who the trustee is now,

• updating real property records,

• collecting date-of-death values for tax basis,

• and cleaning up any assets that never made it into the trust.

A practical checklist for the surviving spouse (and trustee)

1) Gather the key documents

Start a single folder (paper or digital) with:

• Trust, wills, and any amendments

• Death certificate certified copies

• Marriage certificate (sometimes requested)

• List of assets and logins

• Last year’s tax returns

2) Lodge the decedent’s will with the probate court (even if there’s no probate)

In California, the custodian of the will generally must deliver the original will to the Superior Court clerk within 30 days of learning of the death (unless a probate petition is filed sooner).
This step is easy to miss because people associate “wills” with “probate,” but lodging is often required even when the trust avoids probate.

3) Update title records for real estate

For each piece of real property held in the trust, it’s common to:

• Prepare and record an Affidavit of Death/Change of Trustee (wording varies by county/recorder and title company preferences) so the public record clearly shows who the acting trustee is.

• Notify the County Assessor using the appropriate “death of owner / change in ownership” reporting.

4) Get date-of-death values so you don’t lose tax benefits

One of the biggest financial “wins” after a spouse’s death is often the basis adjustment (sometimes called a “step-up in basis”). In plain English: certain assets may get their tax basis reset closer to fair market value as of the date of death—reducing potential capital gains tax later.

Common next steps:

• Order date-of-death appraisals for real estate.

• Ask brokerages/custodians for date-of-death values and any basis adjustments.

• Coordinate with your CPA/attorney, especially because community property rules can affect what gets adjusted.

5) Identify “trust assets” vs. “straggler assets”

Even excellent plans sometimes have accounts left outside the trust.

If an asset is in the decedent’s individual name (and no beneficiary designation controls it), you may be able to use a small estate affidavit process for certain assets—depending on value and timing. California’s maximum values are updated periodically; as of deaths on or after April 1, 2025, the “Affidavit for Collection… of Personal Property” threshold is $208,850, and the “Petition… Succession to Primary Residence” threshold is $750,000.

6) Notify financial institutions and claim benefits

This usually includes:

• Banks and brokerage firms (freeze protocols vary)

• Life insurance claim forms

• Pension/retirement administrators

• Social Security survivor benefits review (the surviving spouse may be entitled to the higher benefit, and there’s also a one-time $255 lump-sum death payment in some cases).

• If the decedent was a veteran, explore burial allowances (amounts depend on eligibility and date-of-death categories).

7) Cars, credit cards, and the “small stuff” that becomes big later

A few commonly overlooked items:

• Vehicle title transfers may require DMV forms like REG 5 and REG 256 depending on the situation.

• Credit cards, airline miles, and loyalty points: each issuer has its own policy.

• Personal property memorandum and any specific gifts: confirm whether anything needs to be distributed now, later, or not at all.

8) Mortgage and “successor in interest” issues

If there’s a mortgage, the surviving spouse typically keeps paying as usual, but it’s still smart to notify the servicer and ask about their “successor in interest” process—especially if the loan was only in the decedent’s name.

9) Medi-Cal: don’t ignore notice requirements

If the decedent received (or may have received) Medi-Cal benefits, California law can require notice to DHCS within 90 days of death in certain situations.

10) Update the surviving spouse’s own plan

After the dust settles, this is the moment to:

• Update the Certificate of Trust

• Refresh Durable Power of Attorney and Advance Health Care Directive

• Consider whether the trust should be restated (especially if the old plan named the deceased spouse in multiple roles)

• Review and update beneficiary designations (IRA/401(k)/annuity/life insurance)

And if a child is already helping with finances, it may be worth discussing whether adding them as a co-trustee (now or later) improves oversight and reduces stress.

A joint living trust can dramatically reduce probate headaches—but it doesn’t eliminate the need for thoughtful “cleanup” after the first spouse’s death. The right checklist (and the right support) helps the surviving spouse protect assets, preserve tax benefits, and regain a sense of control during a hard season.

Trust Amendments vs. Full Restatements: Which Makes Sense for Your Living Trust?

If you already have a revocable living trust, that is good news: you are ahead of many Californians. But estate plans are not set and forget. Families grow, laws change, and your goals shift. When it is time to update your trust, you usually have two tools available: an amendment or a full restatement.

Both options can work, but they are not interchangeable. Here is how they differ, and how we think about them in terms of clarity, administration, privacy, and how changes land with your heirs and beneficiaries.

What is a trust amendment?

An amendment is a standalone document that makes targeted changes to your existing trust. It might update trustees, change a distribution pattern, or revise a tax clause. The original trust stays in place, and the amendment simply adds to or edits specific sections.

Because amendments are narrow, they are often used for smaller updates or when the overall structure still works well.

What is a full restatement?

A restatement completely rewrites your trust while keeping the original trust name and date. Your assets do not have to be retitled, because legally it is the same trust, just with updated terms. Think of it as a new edition of a book rather than a sticky note on the old one.

Restatements are usually the better choice when there are multiple prior amendments, big life changes, or a desire to modernize an older document.

Clarity and readability

Clarity is where restatements usually shine. A trustee or beneficiary reading a trust with several amendments has to flip back and forth to piece together what actually applies. That can lead to confusion, delay, and sometimes conflict.

With a restatement, everything is in one clean, integrated document. There is a single current version that reflects your wishes today, which makes it easier for family and professionals to follow.

Ease of administration

During trust administration, especially after death, your successor trustee is juggling grief, paperwork, and family expectations. The simpler the documents, the fewer chances there are for mistakes.

A trust with multiple amendments requires the trustee to track every change and be certain nothing is missed. If an amendment partially replaces a section, the trustee has to interpret how the old and new language interact. A well drafted restatement, by contrast, gives the trustee a single roadmap to follow. That usually translates into smoother administration and lower professional fees.

Another practical concern is what happens to loose-leaf amendments that are not physically attached to the trust instrument. Over the years, clients may sign one-page amendments that get filed in a different folder, misplaced during a move, or never shared with the successor trustee. If those pages cannot be located when they are needed, the trustee may have to rely on an older version of your wishes or seek court guidance, which adds cost and uncertainty.

Privacy and disclosure of past amendments

Privacy concerns often point in favor of a restatement. In any situation, all heirs and anyone named in the trust are entitled to receive copies of the trust, and all amendments. If your plan is a patchwork of the original trust plus several amendments, those prior amendments will end up being disclosed. Anyone receiving notice will be able to see the history of changes.

A restatement pulls the history forward without showing every earlier draft. The prior amendments typically do not need to be shared, because the restatement is now the governing document. That can keep sensitive changes or outdated planning decisions from being unnecessarily examined.

Significant changes and family dynamics

How you implement major changes can also affect how they are received. If you are making minor tweaks, such as changing a back up trustee or adjusting a small gift, an amendment is often appropriate.

If you are making significant shifts, such as changing who ultimately receives the bulk of your estate or altering how and when children inherit, a restatement is usually cleaner. It signals that you have taken a fresh look at your overall plan rather than quietly layering a dramatic change onto an old document.

There is also a professional responsibility layer when one law office amends a trust that was originally drafted elsewhere. An attorney who signs off on an amendment is effectively stepping into the chain of liability for how that amendment integrates with the existing document. If the original trust is poorly drafted or internally inconsistent, a simple amendment may unintentionally magnify those problems. For that reason, many practitioners are cautious about doing one-off amendments to another firm’s work and will instead recommend a full restatement so they can stand behind the entire updated instrument, not just a single page of changes. If you are making minor tweaks, such as changing a back up trustee or adjusting a small gift, an amendment is often appropriate.

Putting it together

In practice, one or two modest amendments are usually fine. Once you start to see several amendments, or your life and assets look different from when you first signed your trust, it is often more efficient and clearer to move to a full restatement.

The right choice will depend on the age of your documents, how many changes you have already made, the complexity of your assets, and your goals for privacy and family harmony. A conversation with an experienced estate planning attorney can help you decide whether a focused amendment or a comprehensive restatement best serves your needs.

So You’re a Trustee—Now What? Practical Tips for Navigating Trust Administration

Being named as the trustee of a loved one’s trust is an honor—but it also comes with serious responsibilities. Whether you’re stepping into this role after someone has passed away or due to their incapacity, it’s completely normal to feel overwhelmed at first. Most people appointed as trustees are not lawyers or accountants—they're spouses, adult children, or close friends. If that’s you, here are key tips and suggestions to help you navigate trust administration with clarity and confidence.

1. Pause and Breathe—You Don’t Need to Do Everything Overnight

One of the biggest mistakes new trustees make is acting too quickly. You might feel pressure from family members or beneficiaries to distribute money right away, but rushing can lead to costly errors. In California, trust administration is a process—not a one-time event. You’ll need to take care of notices, gather information, assess assets, and potentially file tax returns. Take your time and seek professional guidance before making big moves.

2. Get a Copy of the Trust and Understand It

You should read the entire trust document (ideally with help from an estate planning attorney) to understand your duties and the specific instructions left by the trust creator (the “grantor” or “settlor”). Look for provisions about distributions, timing, successor trustees, and any special conditions. Make note of your powers and limitations—these will guide your decisions.

3. Keep Beneficiaries Informed

Communication is one of the most underrated tools in trust administration. Beneficiaries are less likely to become anxious or litigious if they’re kept in the loop. You’re required to send out a formal notice under Probate Code section 16061.7 within 60 days of the grantor’s death. Beyond that, updates can be as simple as a friendly email or occasional phone call—transparency builds trust.

4. Inventory the Assets and Safeguard Them

Your job as trustee is to locate, secure, and manage all trust assets. This might include bank accounts, real estate, retirement accounts, life insurance, and personal property. Open a trust checking account for all financial activity, and don’t mix trust funds with your own. Everything should be accounted for—every dollar in and out.

5. Get Professional Help When You Need It

You’re not expected to do this alone. Trustees are allowed—and encouraged—to hire professionals such as attorneys, accountants, and financial advisors to help them fulfill their duties. Their fees are paid by the trust, not out of your pocket. The right team can prevent mistakes and help you meet all your legal and tax obligations.

6. Document Everything

Keep detailed records of every action you take on behalf of the trust. This includes paying bills, making distributions, selling property, and communicating with beneficiaries. Accurate documentation protects you and provides a clear paper trail in case anyone questions your decisions later.

Being a trustee is a serious responsibility, but with the right approach and support, you can carry out your duties with integrity and confidence. If you’ve recently become a trustee, don’t hesitate to reach out for legal guidance—it’s one of the smartest steps you can take to protect yourself and honor the trust placed in you.

Trust Administration 101: Seven First Steps Every Successor Trustee Should Know

When a loved one passes away with a revocable living trust, the court‐supervised probate you’ve heard horror stories about can usually be avoided—but that doesn’t mean there’s nothing to do. California law imposes clear duties on the successor trustee, and mishandling them can create family disputes, tax penalties, and even personal liability. Here’s a concise, step-by-step game plan you can share with clients (or bookmark yourself) to keep the process on track.

1. Read—and Understand—the Trust Instrument

Before touching a single bank account, sit down with the full trust document and any amendments. Confirm you’re actually the named successor trustee, clarify distribution instructions, and note any age-based or staggered payouts. If the language feels opaque, hire counsel early; misinterpretations are far costlier than a one-hour legal consult.

2. Secure Original Estate-Planning Documents

Collect the original trust, pour-over will, and signed powers of attorney. You’ll need the pour-over will to lodge with the county within 30 days of death (Probate Code §8200) and the certification to open or re-title accounts.

3. Inventory and Safeguard Assets

Create a master list of trust assets—real estate, brokerage and retirement accounts, life-insurance proceeds payable to the trust, tangible personal property, and digital assets. Switch home-insurance policies to a trustee-owned status. Physical items of significant value (jewelry, firearms, collectibles) should be photographed and stored securely to head off “souvenir” temptations.

4. Notify Beneficiaries and Relevant Agencies

California trustees must send a §16061.7 notice to all trust beneficiaries and legal heirs within 60 days of the settlor’s death. This starts a 120-day statute of limitations for contesting the trust—so procrastination keeps the cloud of litigation hanging longer. Also file Form 56 with the IRS to alert them you’re the fiduciary and order an employer-identification number (EIN) for the trust’s post-death administration phase.

5. Open a Dedicated Trust Checking Account

Co-mingling personal funds with trust money is a breach of fiduciary duty. Open a new account under the trust’s EIN to collect incoming dividends, rent, or sale proceeds and to pay administration expenses. Maintain meticulous records: every deposit, disbursement, and receipt should be traceable.

6. Value the Estate and Address Taxes

For estates exceeding the current federal exemption or containing hard-to-value assets like closely held businesses, hire a qualified appraiser. Even if no estate tax is due, you’ll need date-of-death values to establish new basis for capital-gains purposes. File a final 1040 for the decedent, and if income is generated during administration, a 1041 fiduciary return for the trust.

7. Distribute—and Document—According to the Trust

Once debts, expenses, and tax liabilities are satisfied, prepare a proposed distribution schedule. Obtain signed receipts from beneficiaries when they receive funds or property; this protects you from claims of unequal treatment. Consider a “receipt and release” agreement that acknowledges the beneficiary’s share was received and releases you from further liability.

Serving as a successor trustee is an honor—and a job. Transparent communication, diligent record-keeping, and timely professional guidance are the pillars of a smooth administration. If you’ve just inherited the trustee hat, don’t go it alone; an experienced trust-administration attorney can turn a daunting checklist into an orderly roadmap, allowing you to focus on honoring your loved one’s legacy. Contact us immediately for assistance with the administration process.

Don’t Wait—Why Prompt Estate or Trust Administration Matters

After a death, the clock starts ticking. Under Probate Code §16061.7, a successor trustee has 60 days to notify heirs and beneficiaries once a revocable trust becomes irrevocable. Dragging your feet invites problems:

• Statutory penalties & personal liability. Missed notices or late accountings can expose the trustee to surcharge or removal.

• Tax deadlines. Estate tax returns (Form 706) and fiduciary income tax returns (Form 1041) carry hard due dates—often nine months or less from death. Interest and penalties accrue quickly.

• Asset risk. Uninsured property, uncollected rents, or unmanaged investments can lose value fast. Early action secures, inventories, and, where appropriate, sells or re-titles holdings.

• Beneficiary confidence. Silence breeds suspicion. Timely communication maintains transparency and reduces litigation threats.

• Strategic elections. Portability of a deceased spouse’s estate-tax exemption and capital-gain step-ups are use-it-or-lose-it. Delay can cost the family six figures.

Bottom line: prompt administration protects both beneficiaries and the person in charge. If you’ve been named trustee or executor, Shafae Law can guide you from day one so you stay compliant and stress-free.

What Happens to a Living Trust When One Spouse Dies?

When a married couple sets up a revocable living trust, it’s usually designed to make things easier when one spouse passes away. But many surviving spouses and family members are still left wondering: Now what?

If your spouse has died and you had a joint living trust, here’s what you need to know about what comes next.

1. The Trust Doesn’t Automatically “Do” Everything

While a trust is designed to avoid probate and streamline administration, it doesn’t handle itself. After the death of the first spouse, the surviving spouse (or a named successor trustee) needs to take several legal and financial steps to keep the trust working properly.

2. You May Need to Split or Allocate the Trust

If your trust was drafted to include estate tax planning or asset protection provisions, it may require the trust to be divided into sub-trusts—often called a Survivor’s Trust and a Bypass (or Decedent’s) Trust. This division helps preserve estate tax exemptions and protect assets for children or other beneficiaries.

Not all trusts require this split, but it’s important to review the trust with an attorney to understand your obligations.

3. Retitling Assets Is Often Required

Assets titled in the name of the joint trust may need to be retitled into the name of the survivor’s trust or split between sub-trusts. This includes bank accounts, investment accounts, real estate, and more. An experienced attorney can help guide this process and ensure compliance with the trust terms.

4. Notify Beneficiaries and Agencies

California law requires that certain notices be sent to trust beneficiaries and heirs after a death. You may also need to obtain a death certificate, file a change in ownership form with the county assessor (to preserve property tax exclusions), and notify Social Security and other institutions.

5. Tax and Legal Responsibilities Still Apply

You may need to file a final income tax return for the deceased spouse, and if applicable, an estate tax return. In some cases, a surviving spouse can make a “portability” election to preserve unused estate tax exemption for their own future estate. These are time-sensitive decisions that should be discussed with a qualified professional.

The Bottom Line:
Even with a trust in place, there are important steps to take after a spouse dies. Administering a trust correctly protects the surviving spouse, preserves tax benefits, and honors the wishes set out in the trust.

At Shafae Law, we help families across California navigate trust administration with clarity and care. If you’ve recently lost a spouse, we’re here to help you take the next steps—with compassion and legal precision.

What to Do After Losing a Loved One: A Step-by-Step Guide

Losing a loved one is an emotional and overwhelming experience. In addition to grieving, there are important legal and financial matters that need attention. Whether you have lost a spouse, parent, or another close family member, understanding the steps to take can help ease the burden during this difficult time.

Step 1: Obtain the Death Certificate

The first legal step after a loved one’s passing is obtaining the death certificate. This document is required for many processes, including claiming life insurance, settling accounts, and handling estate matters. The funeral home or coroner typically provides copies, but you may need multiple certified copies for various institutions.

Step 2: Notify Family, Friends, and Key Contacts

Informing close family members, friends, and key contacts is crucial. You should also notify employers, social security offices (if applicable), and any other relevant parties. If your loved one had a financial advisor, attorney, or accountant, reach out to them to discuss the next steps.

Step 3: Locate the Estate Planning Documents

If your loved one had a will or trust, it’s important to locate these documents to understand their wishes for asset distribution, funeral arrangements, and other final affairs. If no estate plan exists, state intestacy laws will dictate how assets are distributed.

Step 4: Secure Assets and Protect Property

To prevent identity theft or unauthorized use, secure your loved one’s home, financial accounts, and personal belongings. This may include changing locks, notifying financial institutions, and ensuring property remains maintained and insured.

Step 5: Begin the Probate or Trust Administration Process

If your loved one had a trust, the successor trustee will manage and distribute assets according to the trust’s terms, avoiding probate. However, if assets were solely owned without a trust, the estate may need to go through probate, a court-supervised process that can take months or even years. Consulting an estate planning attorney can help clarify the next steps and expedite the process.

Step 6: Update Your Own Estate Plan

If you lost a spouse, it’s essential to review and update your own estate plan. This includes revising beneficiary designations, updating your will or trust, and ensuring your power of attorney and healthcare directive reflect your current wishes.

Final Thoughts

Losing a loved one is never easy, but understanding the necessary steps can help you navigate this challenging time with confidence. Seeking legal guidance can ensure everything is handled properly, giving you and your family peace of mind as you honor your loved one’s legacy.

Managing Your Digital Assets: A Key Part of Estate Planning

When it comes to estate planning, most people focus on the big-ticket items like homes, retirement accounts, and family heirlooms. But in today’s digital age, an often-overlooked aspect of your estate is your digital footprint.

What Are Digital Assets?

Digital assets are more than just email accounts and social media profiles. They encompass everything from your financial accounts and online subscriptions to your digital photos, cryptocurrency, and even your personal websites or blogs.

Here’s a breakdown of common digital assets:

• Social Media: Facebook, Instagram, X (Twitter), LinkedIn, and TikTok accounts.

• Financial Accounts: Online banking, investment platforms, cryptocurrency wallets, and Venmo/PayPal accounts.

• Subscriptions and Services: Streaming services (like Netflix and Spotify), cloud storage (such as Google Drive or Dropbox), and online shopping accounts (Amazon).

• Digital Content: Digital photos, music, videos, and e-books.

• Professional Accounts: Websites, blogs, or YouTube channels that may generate income or hold significant intellectual property.

Why You Should Include Digital Assets in Your Estate Plan

Without the proper estate planning, access to digital assets can become a legal and practical headache for your family after you pass away. Many tech companies, to comply with Federal privacy laws, have strict privacy policies, which could prevent your loved ones from accessing your accounts absent a court order. For example, your family may not be able to retrieve valuable data stored in a cloud account, or close out financial accounts that aren’t linked to physical documentation.

In the Bay Area, where tech plays an essential role in both professional and personal lives, this can be especially important for young adults working in industries that rely on digital platforms.

Steps to Manage Your Digital Assets

Here are some essential steps to incorporate digital assets into your estate plan:

1. Create a Digital Inventory: Start by making a list of all your digital accounts, from social media profiles to financial and business accounts. Be sure to include login credentials, passwords, and security question answers. This list should be stored in a secure location that your trusted decision maker can access, like a password manager or secure physical document.

2. Set Your Preferences: For social media accounts, check if the platforms offer legacy options. For example, both Facebook and Apple allow you to assign a legacy contact to manage your account after your death. Be clear about whether you’d like accounts memorialized or deleted.

3. Include Digital Assets in Your Will and Trust: Make sure your estate plan outlines specific instructions for digital assets. You can specify how your digital financial assets should be distributed and who should have access to your personal accounts.

   In California, you can appoint someone to handle your digital assets as part of your estate plan. This person will ensure your wishes are followed regarding the management or deletion of your accounts. They should be tech-savvy and familiar with handling digital platforms.

   Even without appointing someone specifically for this, be sure your estate planning documents contain appropriate provisions for any of your trustees to have the adequate legal authority to handle digital assets. For example, if your trust was established in the 1990s, it’s possible those provisions were not a consideration.

4. Keep Your Plan Updated: As technology evolves, so does your digital footprint. Update your digital inventory and estate plan regularly to reflect any new accounts or assets.

In a tech-centric region like the San Francisco Bay Area, neglecting your digital assets in your estate plan could leave your family with unnecessary complications. By taking the time to organize and plan for the distribution and management of your digital assets, you’re ensuring that your legacy, both physical and digital, is protected.

If you’re ready to secure your digital estate, contact our firm to discuss how we can help integrate your digital assets into your comprehensive estate plan.

What Needs to Happen When Someone Dies?

After a client has designed their estate plan, the most common question we get, by an overwhelming margin, is some form of “What needs to happen when someone dies? How does someone execute this estate plan we have created?”

Notice

When someone dies, there usually isn’t an alert that goes out to your loved ones, your banks, your employer, your utility companies, your credit card companies, etc. Well, unless you’re a celebrity. But for us non-celebrities, the news of one’s death trickles out organically. Loved ones handle the deceased’s remains and any rituals–funeral, memorial, wake, spiritual ceremony, etc. Sometime from a week up to a month and a half after the death, the county produces a death certificate. With the death certificate, the decedent’s loved ones begin to notify all interested parties and organizations of the decedent’s passing.

Knowledge

When the decedent’s loved ones are emotionally and psychologically ready, they begin to piece together what they can about the decedent’s life. This will include discovering the assets and debts of the decedent, obtaining control over any digital accounts and assets (like social media and cloud accounts), as well as determining whether the decedent had an estate plan. Hopefully, the decedent alerted the people involved in their estate plan as to the location of the estate planning documents. That’s not always the case, so sometimes this step may involve a bit of a “wild goose chase” for the documents.

Administration

Once it is determined whether there is an estate plan, steps are taken to administer the estate. There are two main routes of estate administration:

Only a Will, or no estate plan

If no estate plan is discovered, or the decedent only had a will, then the decedent’s estate must go through the probate process. Read our prior post about what probate entails. Our office can be retained to assist the loved ones guide the decedent’s estate through probate if there is only a will, or no estate plan at all.

Estate plan with a living trust

If the decedent died having created an estate plan built upon a living trust, then the administration of their assets is handled privately by way of trust administration. Trust administration is often quicker and less expensive than probate administration. The person named as the successor trustee of the living trust is tasked with carrying out the terms of the trust, along with providing notices required by law, marshaling and valuing assets, paying any debts and expenses, and distributing the remaining assets following the terms of the distribution provisions of the trust.

To assist them, the successor trustee can hire an attorney (like our office, for example!) to represent them in carrying out their duties. Trust administration can differ greatly from one trust to another. Also, trust administration varies greatly whether the decedent was married and survived by a spouse versus being unmarried or the second spouse to die. Trust administration can be handled by attorneys whether or not the attorneys drafted the estate plan.

If you lost a loved one, contact us to schedule a complimentary initial consultation to figure out next steps.

Distribution Options for Your Beneficiaries

One of the main reasons cited for creating an estate plan is to care for loved ones. An estate plan allows you to expressly name beneficiaries to your estate, the methods by which the gifts will be distributed, how the distribution is administered, whether there are any conditions on the gifts, and so forth. Most people want to provide for family members, relatives, or close friends. This post will survey some common options for how you can make the gift.

Outright and free of trust

The most straightforward way to provide for someone is outright and free of trust. Upon your death (or your spouse’s death, or after the second of you to die, etc.), the gift is distributed to the intended beneficiary, and assuming they are above the age of 18, the gift is now owned by them. That’s it. For example, if you leave $40,000 to Person X, then upon your death, Person X receives $40,000 to do whatever they want. It works similarly for percentage or fractional gifts, like 25% of your estate, or 1/3 of your estate. The value is calculated, and when the distribution stage takes place, the beneficiary receives that gift as their own. The limitation to this method of giving is that you relinquish all control over the gift. If the beneficiary was going through some life challenges, like a divorce or a bankruptcy, your gift may end up never reaching the beneficiary at all. Or if they face significant debt, your life’s work may have ended up going straight into the hands of the beneficiary’s creditors.

Sometimes a little nuance is needed. Maybe dropping a large sum of money on someone isn’t the best idea under the circumstances.

In Trust

Leaving a gift in trust for someone can provide a lot of flexibility and oversight. This option creates a trust (a separate trust other than your living trust) naming your beneficiary as the beneficiary of this newly created trust. You also name the Trustee managing the assets held in trust. 

These trusts are created after your death. They are sometimes called “beneficiary trusts”,  “inheritance trusts”, “FBO trusts” (“for the benefit of”), “GST trusts” (generation skipping transfer), “dynasty trusts”, or “asset protection trusts”. For the most part, all of those terms can be interchangeable. They all describe an irrevocable trust set up for the benefit of someone other than yourself. “Irrevocable trust” means that the beneficiary is not able to change the terms of the trust (unlike your living trust, which is amendable during your life). The two main reasons someone may want to create irrevocable inheritance trusts is to 1) retain some control over the gift; and 2) protect the gift from the beneficiary’s creditors (think: the beneficiary’s ex-spouse in a divorce, a plaintiff in a judgment against the beneficiary, or from a bankruptcy). By keeping an inheritance in trust, the assets in trust will not “count” toward the assets of the individual beneficiary, and remain somewhat shielded from those creditors.

If you want to provide for a minor (a child under the age of 18), then a beneficiary trust is the way to go. You can name someone as Trustee of the trust to manage the gift for the benefit of the minor child, and that person does not need to be the child’s parent or guardian. You can specify when, if at all, the minor beneficiary is able to take over as Trustee of their inheritance.

Similarly, you can provide for someone who is financially immature or has addiction issues. A trust allows you to provide for someone even when they are not fully capable of providing for themselves.

Supplemental Needs Trust

Sometimes a beneficiary is receiving government assistance that is means-tested. For example, many MediCal and SSI/SSA benefits have eligibility requirements pertaining to a recipient’s income or net worth. If your beneficiary receives a lump sum inheritance, it could disrupt those benefits. The beneficiary would then need to use their inheritance for their care in place of the government benefits, and they would likely end up destitute, back on the government benefits. By leaving the inheritance in a supplemental needs trust, the trust can provide for the beneficiary without disrupting their means-tested assistance.

With trusts, you can place conditions on your gifts. For example, a common condition for parents is that their children be educated before receiving their inheritance. However, what may be clear in your head, may be ambiguous to someone carrying out your instructions. What does educated mean? Does the child need to earn a degree? Two year degree or four year degree? Does the institution need to be accredited? Does the institution need to be located in the United States? Can it be an online institution? You get the idea. You can place any condition on your gift that you like. However, an estate plan is only as effective as it is executable. There needs to be as little ambiguity in the trust terms as possible.

When you work with an estate planning professional, they will field all of the available options, discuss your goals, and assist you with matching your options and your goals. And after all that, an estate planning professional will make sure the documents are drafted correctly, with as little ambiguity as possible.

What is... a Trustee?

This is part of an on-going series of blog posts titled the "What Is..." series, where we attempt to explain, in simple terms, common estate planning terms and concepts. To read other posts in this series, click here.

A trustee is a person (or sometimes an institution, like a bank) who has the power to act on behalf of a trust. If you establish a living trust (as a trustor), then most of the time you will be the initial trustee. You act on behalf of the trust. 

As the trustor (also known as the person who established the trust), you also name successor trustees -- people who will act on behalf of the trust after you, either because you no longer want to, or you are not able to do so, or because you have passed away. 

As the trustee of your own living trust, nothing changes on a day-to-day basis. You even file taxes the same way. The living trust is more like a legal alias for you.

But what do your successor trustees do for your trust? Or, what do YOU do if you’re named as a successor trustee for someone else? 

In sum: the trustee’s job is to carry out the directions set forth in the trust document. 

There are some initial steps that a successor trustee must take after the death of the trustor. Please note that this is not an exhaustive list -- and this is exactly what we help with as attorneys. This is for informational purposes, to give you some idea of the responsibilities involved. 

First, the trustee must accept the position so that they can act on behalf of the trust. Then:

1. In general, the trustee must notify the beneficiaries and heirs that they are beneficiaries of the trust.

2. Certain government offices must be notified as well, depending on the trustor’s assets and benefits. For example, if the trustor owned real estate, then the assessor’s office must be notified. If the trustor was receiving social security benefits or Medi-Cal benefits, those agencies would need to be notified.

3. The trustee must then inventory and determine the value of assets as of the date of the trustor’s death (e.g. appraisals of property, etc.). This is required to determine the value of the assets for tax purposes, and to provide an accounting of the trust property to the beneficiaries.

4. In addition to handling an estate tax return, the trustee may be required to file the trustor’s final income tax return for the year that they died. The trustee may also have to file an income tax return if the trust estate earns money before it is all distributed to the beneficiaries. 

The trustee must then follow the instructions in the trust, within the boundaries of the law. This may include paying funeral expenses, outstanding credit card debts, etc. Some trusts have certain time periods during which the beneficiaries should receive a distribution, or they may have conditions that must be met before a beneficiary receives a distribution. Some trusts require waiting a certain period of time before the beneficiary receives a distribution, or the trust may contain outright restrictions on distribution. The trustee is tasked with interpreting and executing all of these instructions.

The trustee has a fiduciary duty to the trust. This means that just because they have the right to do something doesn’t mean that they should do it. For example, they may have the ability to sell trust assets like a home, but if they sell it for below the market value, or in a down market, they could have breached their fiduciary duty.

It’s important to know what the trust says to be able to execute its provisions and comply with the legal requirements. 

If you are a successor trustee for a loved one, please contact us for a free initial consultation. If you have a trust, and would like to ensure that it says what you want it to say for your trustee, please also contact us for an initial consultation.

Trustees and Fees

If I ask someone to be a trustee for me, I want to make sure that they get paid. Do I need to give them a specific amount in the trust? 

Most trusts (like most of the ones we draft) include a provision that permits the trustee to receive “reasonable” compensation. In most cases, this is determined based on the amount of time and complexity of an estate. And, in most cases, there is no dispute about the trustee receiving reasonable compensation. 

However, if you anticipate that someone might challenge the compensation, then you absolutely can specify how a trustee will be compensated. For example, you might select a percentage of your assets as payment or you might select an hourly rate that increases with inflation. 

(Note: If you have a professional fiduciary serve as a successor trustee, then they will provide their own rate of pay.)

How does someone determine what is a reasonable fee?  

The trustee must keep track of all the time that he or she spends in the role of trustee. The trustee should keep a log of the date, amount of time*, and each task that was performed. More complicated tasks are entitled to increased compensation. Keeping clear records is important. 

At the end of the year, the trustee can obtain the fee. By keeping clear records, the beneficiaries understand why the trustee is requesting the amounts and what they did during that time. Additionally, if administering the trust takes multiple years, the beneficiaries are less likely to raise issues or questions if the fees are spread over several years. 

*How does a trustee track time? 

We recommend tracking time by 15 minute increments or less. In other words, if something takes you 10 minutes, then it’s okay to put in .25 as your time; it is not okay to round up to an hour. 

Is the trustee’s fee considered a gift? 

No. The trustee’s fee is taxable income. It is earned. However, if the trustee spends money that is reimbursed (e.g. mileage for trips on behalf of the trust or tolls) than this is not income and therefore not subject to income tax. 

How does the trustee pay for things? 

The trust pays for trust expenses. Depending on the terms of the trust and the point at which a trustee begins managing the trust, the trustee should create a trust administration bank account, opened using a taxpayer ID that is specifically for the trust. 

What if my trustee doesn’t want to accept a fee? 

Even if the trustee chooses to waive a fee, he or she is still entitled to receive one and should take the approach we recommend above. A trustee may begin by saying that they don’t want a fee, but if the time and complexity becomes too much, they may decide otherwise. Having clear records is the key. 

Why wouldn’t a trustee accept a fee payment? 

Trustee fees are income, and therefore subject to income tax. If the trustee is also a beneficiary of the trust, they may decide to waive the fee as they would receive funds as a trust distribution anyway. 

If I become a trustee, what’s the first thing I should do? 

We strongly recommend speaking to an attorney (like us) as early as possible. We know that grieving can take a toll, but we also are here to help guide you through the trust administration process.