What a Successor Trustee Should Do When You Pass

Initial Steps: What to Do Right Away

The first task is to locate the original trust document and any amendments. Check your files, safe deposit box, or with the attorney who drafted the trust. The trustee also needs your death certificate, which they can get from the funeral home or county vital records office.

Next, the trustee should notify key parties: beneficiaries, financial institutions, and anyone else who needs to know. This includes sending a formal notice to beneficiaries, which state law may require. The trustee should also gather your financial statements, property deeds, and insurance policies.

• Obtain several certified copies of the death certificate.
• Locate the trust document, amendments, and any pour-over will.
• Notify beneficiaries in writing, following state rules.
• Inventory all trust assets and liabilities.
• Check for any outstanding debts or taxes.

Understanding the Trust Terms and Your Authority

The trustee must read the entire trust document carefully. It explains their powers, such as selling property or managing investments. If the trust is revocable, it becomes irrevocable upon your death, so the trustee's role changes from passive to active.

The trustee should request a certified copy of the trust and a certificate of trust (or memorandum of trust) for dealing with third parties like banks. This document proves their authority without revealing all the trust details.

Managing and Protecting Trust Assets

The trustee is now responsible for safeguarding the assets. This includes securing real estate, moving valuable items to a safe place, and ensuring insurance coverage is adequate. They must keep the assets separate from their own and from other trusts.

The trustee should open a dedicated trust bank account if one doesn't exist. All income, such as rents or dividends, goes into this account. They must also keep meticulous records of every transaction, as they will need to report to beneficiaries and possibly the court.

• Change locks and secure the home if vacant.
• Cancel unnecessary subscriptions or services.
• Notify insurance companies of the death and the trustee's role.
• Collect all mail and forward it to the trust address.
• Set up a system for tracking income and expenses.

Paying Debts, Taxes, and Expenses

The trustee must pay valid debts of the estate and the trust. This includes credit card bills, mortgages, and medical expenses. However, they should not rush to pay all debts; they must verify they are legitimate and within the statute of limitations.

The trustee is also responsible for filing final income tax returns for you (the decedent) and the trust, if required. They may need to file estate tax returns if the estate is large enough. State rules vary, so the trustee should consult a tax professional.

• Notify creditors in writing, if state law requires.
• Review all bills and statements for accuracy.
• Pay ongoing expenses like property taxes and utilities.
• Set aside funds for potential tax liabilities.
• Keep records of all payments made.

Distributing Assets to Beneficiaries

Once debts and taxes are settled, the trustee can distribute the remaining assets according to the trust terms. This may involve transferring property titles, selling assets and distributing cash, or setting up trusts for minor beneficiaries.

The trustee should obtain receipts from beneficiaries when they receive their share. This protects the trustee from future claims. If a beneficiary is a minor or has special needs, the trustee may need to manage the assets for them until they reach a certain age.

• Prepare a final accounting of all trust transactions.
• Get written consent from beneficiaries before final distribution.
• Transfer real estate with a deed and record it with the county.
• Retain records for at least a few years after distribution.

Common Pitfalls and How to Avoid Them

A common mistake is commingling trust assets with personal funds. This can lead to legal trouble and loss of trust. Another pitfall is failing to keep beneficiaries informed, which can cause disputes and even litigation.

The trustee should not make distributions until all debts and taxes are paid, as they could be personally liable. They should also avoid making hasty decisions about selling property without proper valuation. Consulting with an estate attorney or accountant is often wise.

• Always use the trust's EIN for tax matters, not the decedent's Social Security number.
• Do not distribute assets until the creditor claims period has passed.
• Get professional appraisals for real estate and valuable items.
• Keep detailed notes of every decision and communication.