Trust Administration Lawyer in Orange County, California

Following the death of a family member or loved one, it is difficult for even the most financially savvy person to focus on the tasks required to administer a trust and settle the decedent’s estate. Modern Wealth Law has Orange County trust administration lawyers with significant experience in advising both Trustees (individual and institutional) and beneficiaries regarding trust administration.

Administering a Trust After the Death of a Spouse

Upon the passing of your spouse, there are several items that must be addressed, some in a very short period of time. The first step is reviewing the Trust. Unfortunately, most Trusts are not written in a way so that they are easily understandable. Even lawyers hire us to interpret and explain Trusts on their behalf. To add to the confusion, many Trusts are boilerplate Trusts that address issues completely irrelevant to your family. We can assist you with reviewing your Trust and determining the steps that must be taken. Some Trusts require a division or allocation of assets into “Sub-Trusts.” Other Trusts do not require a division or allocation of assets at all. If your Trust was executed before 2011, there is a more than likely chance that your Trust requires a division of assets upon the passing of the first spouse.

Administering a Trust After the Death of Parents

Upon the passing of your parents, or upon the passing of someone who is unmarried, there are significantly more tasks that must be accomplished. Again, we start with reviewing the Trust. We must determine who is entitled to act as Trustee. We must determine the beneficiaries, the division between the beneficiaries and how the beneficiaries are to receive their inheritance. Additional layers of complexity include locating all of the assets and paying all final bills. Sometimes, not all assets are held in Trust and a Probate Code section 850 petition or Heggstad Petition is needed.

Notice Requirements in Trust Administration

Several individuals and entities are required to receive various notices upon the passing of an individual. Notices to Social Security Administration, IRS, Franchise Tax Board, Department of Health Care Services and others are required depending upon the circumstances. Each entity or individual must receive very specific information for the person that has passed away. Beneficiaries must receive notice pursuant to Probate Code section 16061.7 within 60 days after a person passes away.

Distributing Real Estate in a Trust

There are several hurdles and potential landmines for distributing real estate in California. In California, we have Prop 13, which allows your real estate to keep its property tax base from increasing dramatically in any given year. The result is that many homeowners pay property taxes that are below the fair market value of their home. Upon the passing of a person that owned real estate, there are opportunities for the beneficiaries to inherit the real estate at the same property tax level. This could amount to tens of thousands of dollars in tax savings every year. The Orange County Assessor’s Office and the other county assessor’s offices have various applications to request an exemption to property tax reassessment. These notices and requests must be made within a short period of time after a person is deceased. At times, distributing real estate will require a reassessment regardless of what you do. Other times, it is avoidable, and it must be done correctly the first time. You don’t get a second bite at the apple!

Taxes, Taxes and More Taxes

During trust administration, there are several taxes that must be considered. We have income taxes, property taxes, capital gains taxes, estate taxes and inheritance taxes (for some beneficiaries outside of California). Ideally, the person that passed away worked with a long-time accountant that has much of the information we need. However, often times accountants are used to dealing with business taxes and income taxes, and don’t consider some of the other tax issues. As discussed above, property taxes are one of the biggest issues.

Depending upon the size of the estate, estate taxes may be an issue. Even if the estate is not large enough to incur estate taxes, if the decedent is survived by a spouse, he or she may want to consider applying to claim the deceased spouse’s unused exemption (“DSUE”). The DSUE could save the family hundreds of thousands of estate taxes later.

Regardless of the size of the estate, capital gains taxes are a big part of the trust administration. When someone passes away, his or her assets receive a new cost basis, often referred to as a “step-up in basis”. Without going into great detail here, this new basis can minimize the potential for capital gains taxes later. Not all assets receive a new basis, especially when the person was married, so we need to review each asset and how title is held. Understanding the basis rules can have a dramatic effect on how to distribute assets or allocate assets to Sub-Trusts.

Debts and Creditors

Most people pass away with some debt, even if it’s just a cable bill. Others pass with huge mortgages and credit card bills. Not all debts are treated the same. Some debts have higher priority than others. Some debts must be paid to avoid foreclosure. Other debts do not have to paid at all unless a creditor’s claim is filed. Again, we need to review the size of the debt, the source of the debt and the creditor, to determine a course of action.

Trustee’s Duties and Responsibilities

The named Trustee typically has never acted as a Trustee before. Even if you have, not all trust administrations are the same. Besides accomplishing all of the above, there are many judgment calls you need to make. How do you invest the trust assets until they are distributed? When should you sell assets? What assets can you sell? When is it safe to distribute trust assets? How do you keep track of your expenditures? Do you have to report or account to the beneficiaries? How much can you pay yourself as trustee? How can you protect yourself from being sued as Trustee?

Need Help with Administering a Trust?

As you can see, you could read an entire book on trust administration. However, even if you did, it doesn’t mean that it would apply to your specific situation. Our trust administration attorneys in Orange County have helped with administering thousands of trusts and can guide you through the process. Call Modern Wealth Law today at (949) 371-5003 to schedule an appointment regarding your Trust, or contact us throughout our website here.